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Informative Middleman Service, Variety-Expansion and Long Run Growth

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  • Chien-Yu Huang

Abstract

In reality, the intermediate firms not only conduct R&D but also provide informative middleman services to overcome the information cost generated by technological advancements. I incorporate the informative middleman services such as consulting, advertising, technical supporting, repair and maintenance into a variety-expansion model. I find that: (i) Activities of informative middleman influence the steady state growth rate. Given the technology spillover in the informative middleman sectors, the economy can sustain a higher economic growth rate; (ii) The growth of variety leads to the growth of informative middleman services per firm; (iii) Whether an economy may fall into development trap or cross threshold to provide informative middleman services depends on its market scale and the productivity of these services; (iv) The subsidy to informative middleman services can be viewed as a channel of policy intervention.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_024.

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Length: 29 Pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:deg:conpap:c015_024

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  1. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
  2. Lester G. Telser, 1964. "Advertising and Competition," Journal of Political Economy, University of Chicago Press, vol. 72, pages 537.
  3. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  4. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  5. Norton, Seth W, 1992. "Transaction Costs, Telecommunications, and the Microeconomics of Macroeconomic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 175-96, October.
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