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Direct pricing of retail payment methods: Norway vs. US

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Author Info

  • Francisco José Callado Muñoz

    ()
    (Dpt. Economia)

  • Jana Hromcová

    ()
    (Universitat de Girona)

  • Natalia Utrero González

    ()
    (Dpt. Economia)

Abstract

In this paper we provide a general equilibrium model that helps explaining payment choice at the retail level: cash, electronic and paper-based instruments. In particular, it provides theoretical foundations to reconcile previous empirical evidence on this issue. The payment pattern of a given country can be shaped by the payment infrastructure, the cost of each payment instrument, the degree of technology development and the interest rate. We show that the introduction of a cheaper payment instrument, in this case electronic payments, may be welfare improving. The calibration exercise for Norway illustrates that the policy of correct pricing of checks promoted by the Norwegian authorities may imply 4% increase in the welfare of the country.

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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2010-20.

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Length: 40 pages
Date of creation: May 2010
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2010-20

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Keywords: cash; payments; human capital; cash-in-advance;

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References

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  1. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
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  12. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
  13. Marquis, Milton H & Reffett, Kevin L, 1994. "New Technology Spillovers into the Payment System," Economic Journal, Royal Economic Society, vol. 104(426), pages 1123-38, September.
  14. David Humphrey & Moshe Kim & Bent Vale, 1998. "Realizing the gains from electronic payments: costs, pricing, and payment choice," Proceedings 586, Federal Reserve Bank of Chicago.
  15. Hromcová, Jana, 2008. "Learning-or-doing in a cash-in-advance economy with costly credit," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 2826-2853, September.
  16. David B. Humphrey & Lawrence B. Pulley & Jukka M. Vesala, 1996. "Cash, paper, and electronic payments: a cross-country analysis," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 914-941.
  17. Schreft, S L, 1992. "Transaction Costs and the Use of Cash and Credit," Economic Theory, Springer, vol. 2(2), pages 283-96, April.
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