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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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File URL: http://dx.doi.org/10.1016/S1094-2025(03)00054-1
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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. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. O'Neill, Donal, 1995. "Education and Income Growth: Implications for Cross-Country Inequality," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1289-1301, December.
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  4. Gary D. Hansen & Edward C. Prescott, 1999. "Malthus to Solow," Staff Report 257, Federal Reserve Bank of Minneapolis.
  5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  6. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  8. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  9. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  10. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
  11. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  12. 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.
  13. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
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Cited by:
  1. Capolupo, Rosa, 2008. "The New Growth Theories and Their Empirics after Twenty Years," Economics Discussion Papers 2008-27, Kiel Institute for the World Economy.
  2. Hernando Zuleta, 2008. "Energy Saving Innovations, Non-Exhaustible Sources of Energy and Long-Run: What Would Happen if we Run Out of Oil?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  3. Carlos Esteban Posada P., 2004. "Causas del desarrollo y mecánica del crecimiento," Method and Hist of Econ Thought 0411003, EconWPA.
  4. Ferrarini, Benno & Scaramozzino, Pasquale, 2013. "Complexity, Specialization, and Growth," ADB Economics Working Paper Series 344, Asian Development Bank.
  5. Hernando Zuleta, 2011. "Factor Shares, Income Distribution and Capital Flows," DEGIT Conference Papers c016_003, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Gómez, Manuel A., 2008. "Dynamics Of The Saving Rate In The Neoclassical Growth Model With Ces Production," Macroeconomic Dynamics, Cambridge University Press, vol. 12(02), pages 195-210, April.

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