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Transaction Costs, Information Technology and Development

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Author Info
Singh, Nirvikar

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Abstract

This paper examines the impact of transaction costs on economic welfare and development. We extend the static model of Romer (1994), in which transaction costs reduce welfare by the reducing the equilibrium number of intermediate goods, and estimate the welfare losses in the case of domestic transaction costs. The main analysis of the paper extends a dynamic model of Ciccone and Matsuyama (1996) to incorporate transaction costs. We show that high transaction costs reduce the long-run level of development, and may arrest development completely in the extreme case. We also discuss the role of information technology in reducing transaction costs, and offer some preliminary evidence from rural India to illustrate how these reductions may occur through the use of such technologies.

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File URL: http://mpra.ub.uni-muenchen.de/9095/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9095.

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Date of creation: 10 Jun 2008
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Handle: RePEc:pra:mprapa:9095

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Related research
Keywords: transaction costs; information technology; Internet; development; India;

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Find related papers by JEL classification:
P2 - Economic Systems - - Socialist Systems and Transition Economies
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ralf Ruhwedel & Michael Funke, 2004. "Trade, Product Variety and Welfare: A Quantitative Assessment for the Transition Economies in Central and Eastern Europe," Quantitative Macroeconomics Working Papers 20401, Hamburg University, Department of Economics. [Downloadable!]
    Other versions:
  2. Nirvikar Singh, 2004. "Information Technology and Rural Development in India," Santa Cruz Department of Economics, Working Paper Series 1016, Department of Economics, UC Santa Cruz. [Downloadable!]
    Other versions:
  3. John Whalley, 2008. "Globalisation and Values," The World Economy, Blackwell Publishing, vol. 31(11), pages 1503-1524, November. [Downloadable!] (restricted)
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  4. David Hummels & Peter J. Klenow, 2002. "The Variety and Quality of a Nation's Trade," NBER Working Papers 8712, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February. [Downloadable!] (restricted)
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  6. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April. [Downloadable!] (restricted)
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  7. Foley, Duncan K., 1970. "Economic equilibrium with costly marketing," Journal of Economic Theory, Elsevier, vol. 2(3), pages 276-291, September. [Downloadable!] (restricted)
  8. Kaushik, P. D. & Singh, Nirvikar, 2004. "Information Technology and Broad-Based Development: Preliminary Lessons from North India," World Development, Elsevier, vol. 32(4), pages 591-607, April. [Downloadable!] (restricted)
  9. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-39, May. [Downloadable!] (restricted)
  10. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May. [Downloadable!] (restricted)
  11. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 331-360, May. [Downloadable!] (restricted)
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  12. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December. [Downloadable!]
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  13. Nirvikar Singh, 2004. "Information Technology as an Engine of Broad-Based Growth in India," Development and Comp Systems 0412012, EconWPA. [Downloadable!]
  14. Francesco Daveri, 2003. "Information Technology and Productivity Growth Across Countries and Sectors," Working Papers 227, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  15. Charles Kenny, 2003. "The Internet and Economic Growth in Less-developed Countries: A Case of Managing Expectations? 1," Oxford Development Studies, Taylor and Francis Journals, vol. 31(1), pages 99-113. [Downloadable!] (restricted)
  16. Timothy J. Kehoe & Kim J. Ruhl, 2009. "How important is the new goods margin in international trade?," Staff Report 324, Federal Reserve Bank of Minneapolis. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Singh, Nirvikar, 2006. "Services-Led Industrialization in India: Assessment and Lessons," MPRA Paper 1276, University Library of Munich, Germany, revised Dec 2006. [Downloadable!]
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