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A Note on Scale Effects

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  • Hernando Zuleta

    (Universitat Pompeu Fabra)

Abstract

This note presents a simple extension of the seminal Romer (1990, Journal of Political Economy 98(2), 71â102) paper. Allowing for elasticity of substitution between labor and capital to be different from one (CES production function instead of CobbâDouglas), the following results are obtained. (a) The existence of a scale effect depends on the elasticity of substitution between reproducible and not reproducible factors. (b) In the case where the elasticity of substitution is higher than one, (i) there is a scale effect in the long run, (ii) there is a negative scale effect for poor economies, (iii) as economies grow the share of reproducible factors in the national income increases, (iv) as economies grow the share of workers employed in the production of final goods decreases. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 7 (2004)
Issue (Month): 1 (January)
Pages: 237-242

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Handle: RePEc:red:issued:v:7:y:2004:i:1:p:237-242

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Related research

Keywords: Growth; Capital income share; Transition; Scale effects;

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References

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  1. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1290-1310, December.
  2. Gary D. Hansen & Edward C. Prescott, 1998. "Malthus to Solow," NBER Working Papers 6858, National Bureau of Economic Research, Inc.
  3. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  4. Antonio Ciccone & Kiminori Matsuyama, 1993. "Start-up costs and pecuniary externalities as barriers to economic development," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 83, Federal Reserve Bank of Minneapolis.
  5. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 41-63, February.
  6. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, Springer, vol. 5(1), pages 87-120, March.
  8. James A. Brander & Steve Dowrick, 1993. "The Role of Fertility and Population in Economic Growth: Empirical ResultsFrom Aggregate Cross-National Data," NBER Working Papers 4270, National Bureau of Economic Research, Inc.
  9. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  10. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(4), pages 715-730, August.
  11. O'Neill, Donal, 1995. "Education and Income Growth: Implications for Cross-Country Inequality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1289-1301, December.
  12. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  13. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(4), pages 759-84, August.
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Cited by:
  1. Benno Ferrarini & Pasquale Scaramozzino, 2013. "Complexity, Specialization and Growth," CEIS Research Paper, Tor Vergata University, CEIS 275, Tor Vergata University, CEIS, revised 30 Apr 2013.
  2. Carlos Esteban Posada P., 2004. "Causas del desarrollo y mecánica del crecimiento," Method and Hist of Econ Thought, EconWPA 0411003, EconWPA.
  3. Hernando Zuleta, 2008. "Energy saving innovations, non-exhaustible sources of energy and long run; what would happen if we run out of oil," DOCUMENTOS DE TRABAJO, UNIVERSIDAD DEL ROSARIO 004593, UNIVERSIDAD DEL ROSARIO.
  4. Hernando Zuleta, 2011. "Factor Shares, Income Distribution and Capital Flows," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c016_003, DEGIT, Dynamics, Economic Growth, and International Trade.
  5. Gómez, Manuel A., 2008. "Dynamics Of The Saving Rate In The Neoclassical Growth Model With Ces Production," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 12(02), pages 195-210, April.
  6. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Kiel Institute for the World Economy, vol. 3(1), pages 1-72.

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