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Transaction Costs, Information Technology and Development

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  • Singh, Nirvikar

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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  • Singh, Nirvikar, 2008. "Transaction Costs, Information Technology and Development," MPRA Paper 9095, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:9095
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    1. Funke, Michael & Ruhwedel, Ralf, 2003. "Trade, product variety and welfare: a quantitative assessment for the transition economies in Central and Eastern Europe," BOFIT Discussion Papers 17/2003, Bank of Finland Institute for Emerging Economies (BOFIT).
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    7. 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.
    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.
    9. Nirvikar Singh, 2003. "India's Information Technology Sector: What Contribution to Broader Economic Development?," OECD Development Centre Working Papers 207, OECD Publishing.
    10. Dale W. Jorgenson, 2007. "Information Technology and the G7 Economies," NBER Chapters, in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 325-350, National Bureau of Economic Research, Inc.
    11. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-439, May.
    12. Nirvikar Singh, 2003. "Information Technology as an Engine of Broad-Based Growth in India," Palgrave Macmillan Books, in: Frank-Jürgen Richter & Parthasarathi Banerjee (ed.), The Knowledge Economy in India, chapter 2, pages 24-57, Palgrave Macmillan.
    13. 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.
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    15. Charles Kenny, 2003. "The Internet and Economic Growth in Less-developed Countries: A Case of Managing Expectations? 1," Oxford Development Studies, Taylor & Francis Journals, vol. 31(1), pages 99-113.
    16. repec:zbw:bofitp:2003_017 is not listed on IDEAS
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    Cited by:

    1. Jake Kendall & Nirvikar Singh, 2012. "Performance of Internet Kiosks in Rural India," Review of Market Integration, India Development Foundation, vol. 4(1), pages 1-43, April.
    2. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 331-360.
    3. Georgina W. Njiraini & Djiby Racine Thiam & Anthea Coggan, 2017. "The Analysis of Transaction Costs in Water Policy Implementation in South Africa: Trends, Determinants and Economic Implications," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-30, January.
    4. Richartz, P. Christoph & Abdulai, Awudu & Kornher, Lukas, 2020. "Attribute Non Attendance and Consumer Preferences for Online Food Products in Germany," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 69(1), March.
    5. Singh, Nirvikar, 2006. "Services-led industrialization in India: Assessment and lessons," MPRA Paper 1276, University Library of Munich, Germany.
    6. Fuhong Zhang & Apurbo Sarkar & Hongyu Wang, 2021. "Does Internet and Information Technology Help Farmers to Maximize Profit: A Cross-Sectional Study of Apple Farmers in Shandong, China," Land, MDPI, vol. 10(4), pages 1-18, April.
    7. Edy Dwi Kurniati & Indah Susilowati & Suharno, 2019. "Sustainable Competitive Advantage of SMEs through Resource and Institutional-Based Management: An Empirical Study of Batik SMEs in Central Java, Indonesia," Tržište/Market, Faculty of Economics and Business, University of Zagreb, vol. 31(1), pages 61-82.
    8. Jake Kendall & Nirvikar Singh, 2006. "Internet Kiosks in Rural India: What Influences Success?," Working Papers 06-05, NET Institute, revised Sep 2006.
    9. Nijiraini, Georgina & Thiam, Djiby, 2015. "Estimating transaction costs associated with water policy implementation in South Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 212585, International Association of Agricultural Economists.
    10. Dr. Kavita Sexena, 2015. "Position of Information Technology in Service Sector of Indian Economy," Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 10(2), pages 98-102, October.
    11. Nguyen Hung Anh & Wolfgang Bokelmann, 2019. "Determinants of Smallholders’ Market Preferences: The Case of Sustainable Certified Coffee Farmers in Vietnam," Sustainability, MDPI, vol. 11(10), pages 1-20, May.

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    More about this item

    Keywords

    transaction costs; information technology; Internet; development; India;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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