Endogenous Economic Growth through Connectivity
AbstractIn this paper we show the benefits of regional connectivity and specialization to growth. Starting with one region we show how welfare measured by utility per head increases as the number of connected regions increase. We assume a common connectivity infrastructure implemented by satellite, through which the 'Great Connector' (GC) is able to add new regions to the pool of connected regions by taking a tax form those already connected. We find that increasing production costs leads to faster transitions towards the steady state whereas increasing transportation and communication costs tends to lengthen the transition. The results point to reductions in transportation and communication costs in particular as a suitable vehicle to speed up growth. The results also show a strong positive effect of reductions in the cost of making new connections. This has a significant impact on both the steady state growth rate and on transitional growth, while significantly reducing the transition period.
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Bibliographic InfoPaper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 001.
Date of creation: 2010
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Connectivity; Satellites; Growth; Specialization; Networks;
Find related papers by JEL classification:
- O25 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- F15 - International Economics - - Trade - - - Economic Integration
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-30 (All new papers)
- NEP-FDG-2010-01-30 (Financial Development & Growth)
- NEP-GEO-2010-01-30 (Economic Geography)
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