Purpose – The purpose of this paper is to examine the impact of transaction costs on economic welfare and development, and the role of information technology (IT) in reducing transaction costs. Design/methodology/approach – The paper extends the static model of Romer, in which transaction costs reduce welfare by reducing the equilibrium number of intermediate goods, and estimate the welfare losses in the case of domestic transaction costs. The main analysis of the paper extends a dynamic model of Ciccone and Matsuyama to incorporate transaction costs. Also described are case studies of the use of IT in rural India. Findings – In the static model, it is shown that domestic transaction costs have a substantial welfare impact when the number of goods is endogenous. In the dynamic model, it is shown that high transaction costs reduce the long-run level of development, and may arrest development completely in the extreme case. Some preliminary, qualitative evidence from rural India is offered to illustrate how these reductions may occur through the use of IT. Originality/value – The treatment of transaction costs in a dynamic model is novel, and the use of such a model provides a new theoretical underpinning for understanding the potential impacts of IT on development.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 1 (2008) Issue (Month): 2 (December) Pages: 212-236 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Find related papers by JEL classification: O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development O3 - Economic Development, Technological Change, and Growth - - Technological Change L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs P2 - Economic Systems - - Socialist Systems and Transition Economies
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
John Whalley, 2008.
"Globalisation and Values,"
The World Economy,
Blackwell Publishing, vol. 31(11), pages 1503-1524, November.
[Downloadable!] (restricted)
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)