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The Distribution Sector and the Development Process: Are There Patterns? Yes

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  • James H. Anderson

    ()
    (World Bank)

  • Roger R. Betancourt

    ()
    (Department of Economics, University of Maryland)

Abstract

In this paper we bring together three different strands of literature to raise and answer the question posed in the title. The literature in the Kuznets tradition applied to services raises the question of whether the pattern observed for services, namely a rising share of GDP, is also observed for the distribution sector. The literature on the retail and wholesale sector, on the other hand, indicates the existence of economies of scale in the provision of the distribution services that constitute a main output of this sector. Hence, one would expect a different pattern for distribution than for services because the standard assumption in explaining the pattern for services is that the services sector experiences constant returns to scale. By linking the literature on economic development and specialization with the literature on the distribution sector, we can show that an inverted-U pattern between the share of distribution and the level of development should be expected to arise. We construct a cross-section time series data set for 74 countries using UN national income accounts data to calculate the share of retail and wholesale trade in GDP and merge this data set with the one used by Syrquin and Chenery (1989)to analyze the service sector in general. In contrast to their results for services, we find an average time series relation between the share of distribution and the level of development that exhibits an inverted-U pattern with respect to the level of development. We also analyze the average cross-section (country) relation between the share of distribution and the level of development. In contrast to the results of Kravis, Heston and Summers(1983) for services, we also find an inverted-U pattern between the share of distribution and the level of development in this setting.

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File URL: http://www.econweb.umd.edu/~betancourt/distribution/betancourt9902.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics in its series Electronic Working Papers with number 99-007.

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Date of creation: Aug 1999
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Handle: RePEc:umd:umdeco:99-007

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Postal: Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
Web page: http://www.econ.umd.edu/

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Postal: Ms. Elizabeth Martinez, Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
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Related research

Keywords: Distribution Sector; Development Process; Increasing Returns; Specialization;

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References

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  1. Bardhan, Pranab, 1996. "Disparity in wages but not in returns to capital between rich and poor countries," Journal of Development Economics, Elsevier, vol. 49(1), pages 257-270, April.
  2. 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.
  3. Roger Betancourt & Margaret Malanoski, 1999. "An Estimable Model of Supermarket Behavior: Prices, Distribution Services and Some Effects of Competition," Empirica, Springer, vol. 26(1), pages 55-73, March.
  4. Roger R. Betancourt, 1993. "An Analysis of the U.S. Distribution System," OECD Economics Department Working Papers 135, OECD Publishing.
  5. Locay, Luis, 1990. "Economic Development and the Division of Production between Households and Markets," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 965-82, October.
  6. Betancourt, Roger R. & Gautschi, David, 1992. "The demand for retail products and the household production model : New views on complementarity and substitutability," Journal of Economic Behavior & Organization, Elsevier, vol. 17(2), pages 257-275, March.
  7. Panagariya, Arvind, 1988. "A Theoretical Explanation of Some Stylized Facts of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 509-26, August.
  8. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
  9. Ofer, Gur, 1973. "Returns to Scale in Retail Trade," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 19(4), pages 363-84, December.
  10. Anand, Sudhir & Kanbur, S. M. R., 1993. "Inequality and development A critique," Journal of Development Economics, Elsevier, vol. 41(1), pages 19-43, June.
  11. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  12. Walter Y. Oi, 1992. "Productivity in the Distributive Trades: The Shopper and the Economies of Massed Reserves," NBER Chapters, in: Output Measurement in the Service Sectors, pages 161-193 National Bureau of Economic Research, Inc.
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Cited by:
  1. King, Robert P. & Park, Timothy A., 2002. "Modeling Scale Economies In Supermarket Operations: Incorporating The Impacts Of Store Characteristics And Information Technologies," 2002 Annual meeting, July 28-31, Long Beach, CA 19881, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Assaf, A. George & Barros, Carlos & Sellers-Rubio, Ricardo, 2011. "Efficiency determinants in retail stores: a Bayesian framework," Omega, Elsevier, vol. 39(3), pages 283-292, June.

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