IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v51y2015icp515-523.html
   My bibliography  Save this article

The telecommunications industry and economic growth: How the market structure matters

Author

Listed:
  • Jerbashian, Vahagn

Abstract

This paper presents an endogenous growth model where the telecommunications industry is the engine of growth. In such a framework, it analyzes how the market structure of the telecommunications industry can matter for its contribution to long-run growth. It shows that policies which increase the number of firms and/or toughen competition imply higher innovative effort in the telecommunications industry and strengthen its contribution. Modeling entry into the telecommunications industry, this paper also shows that the entry either stops after a number of firms have entered or continues permanently. In the long-run, it is socially optimal to have permanent entry. This can necessitate subsidies to entry into the telecommunications industry.

Suggested Citation

  • Jerbashian, Vahagn, 2015. "The telecommunications industry and economic growth: How the market structure matters," Economic Modelling, Elsevier, vol. 51(C), pages 515-523.
  • Handle: RePEc:eee:ecmode:v:51:y:2015:i:c:p:515-523
    DOI: 10.1016/j.econmod.2015.09.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999315002503
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.econmod.2015.09.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    2. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
    3. Hardy, Andrew P., 1980. "The role of the telephone in economic development," Telecommunications Policy, Elsevier, vol. 4(4), pages 278-286, December.
    4. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
    5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    6. Tommaso M. Valletti & Carlo Cambini, 2005. "Investments and Network Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 446-468, Summer.
    7. Aamir Rafique Hashmi, 2013. "Competition and Innovation: The Inverted-U Relationship Revisited," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1653-1668, December.
    8. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, June.
    9. Olivier Boylaud & Giuseppe Nicoletti, 2003. "Regulation, market structure and performance in telecommunications," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 99-142.
    10. Kevin J. Stiroh, 2002. "Are ICT Spillovers Driving the New Economy?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(1), pages 33-57, March.
    11. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    12. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    13. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    14. Minniti, Antonio, 2010. "Product market competition, R&D composition and growth," Economic Modelling, Elsevier, vol. 27(1), pages 417-421, January.
    15. Venturini Francesco, 2007. "ICT and Productivity Resurgence: A Growth Model for the Information Age," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-26, August.
    16. David Vavra, 2002. "Strategic Interactions, Social Optimality and Growth," CERGE-EI Working Papers wp199, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    17. M. Bourreau & P. Dogan, "undated". "Innovation and Regulation in the Telecommunications Industry," Working Paper 33652, Harvard University OpenScholar.
    18. Hagedoorn, John, 2002. "Inter-firm R&D partnerships: an overview of major trends and patterns since 1960," Research Policy, Elsevier, vol. 31(4), pages 477-492, May.
    19. Evangelia Vourvachaki, 2005. "Information and Communication Technologies in a Multi-Sector Endogenous Growth Model," Money Macro and Finance (MMF) Research Group Conference 2005 10, Money Macro and Finance Research Group.
    20. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    21. Economides, Nicholas, 1999. "The Telecommunications Act of 1996 and its impact1," Japan and the World Economy, Elsevier, vol. 11(4), pages 455-483, December.
    22. Smulders, Sjak & van de Klundert, Theo, 1995. "Imperfect competition, concentration and growth with firm-specific R & D," European Economic Review, Elsevier, vol. 39(1), pages 139-160, January.
    23. Madden, Gary & Savage, Scott J., 1998. "CEE telecommunications investment and economic growth," Information Economics and Policy, Elsevier, vol. 10(2), pages 173-195, June.
    24. Nina Czernich & Oliver Falck & Tobias Kretschmer & Ludger Woessmann, 2011. "Broadband Infrastructure and Economic Growth," Economic Journal, Royal Economic Society, vol. 121(552), pages 505-532, May.
    25. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    26. Theo Van De Klundert & Sjak Smulders, 1997. "Growth, Competition and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 99-118, March.
    27. Belderbos, Rene & Carree, Martin & Lokshin, Boris, 2004. "Cooperative R&D and firm performance," Research Policy, Elsevier, vol. 33(10), pages 1477-1492, December.
    28. Jerbashian Vahagn, 2016. "Knowledge licensing in a model of R&D-driven endogenous growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 555-579, June.
    29. Li, Wei & Xu, Lixin Colin, 2004. "The Impact of Privatization and Competition in the Telecommunications Sector around the World," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 395-430, October.
    30. Oulton, Nicholas, 2012. "Long term implications of the ICT revolution: Applying the lessons of growth theory and growth accounting," Economic Modelling, Elsevier, vol. 29(5), pages 1722-1736.
    31. Guglielmo Barone & Federico Cingano, 2011. "Service Regulation and Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, vol. 121(555), pages 931-957, September.
    32. Rauf Gönenç & Giuseppe Nicoletti, 2003. "Regulation, market structure and performance in air passenger transportation," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 183-227.
    33. Koutroumpis, Pantelis, 2009. "The economic impact of broadband on growth: A simultaneous approach," Telecommunications Policy, Elsevier, vol. 33(9), pages 471-485, October.
    34. Bourreau, Marc & Dogan, Pinar, 2001. "Regulation and innovation in the telecommunications industry," Telecommunications Policy, Elsevier, vol. 25(3), pages 167-184, April.
    35. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    36. John Hagedoorn, 1993. "Understanding the rationale of strategic technology partnering: Interorganizational modes of cooperation and sectoral differences," Strategic Management Journal, Wiley Blackwell, vol. 14(5), pages 371-385, July.
    37. Gandal, Neil, 1995. "Competing Compatibility Standards and Network Externalities in the PC Software Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 599-608, November.
    38. Leff, Nathaniel H, 1984. "Externalities, Information Costs, and Social Benefit-Cost Analysis for Economic Development: An Example from Telecommunications," Economic Development and Cultural Change, University of Chicago Press, vol. 32(2), pages 255-276, January.
    39. Paleologos, John M. & Polemis, Michael L., 2013. "What drives investment in the telecommunications sector? Some lessons from the OECD countries," Economic Modelling, Elsevier, vol. 31(C), pages 49-57.
    40. Richard Blundell & Rachel Griffith & John van Reenen, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 529-554.
    41. Belderbos, Rene & Carree, Martin & Lokshin, Boris, 2004. "Cooperative R&D and firm performance," Research Policy, Elsevier, vol. 33(10), pages 1477-1492, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jerbashian Vahagn, 2016. "Knowledge licensing in a model of R&D-driven endogenous growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 555-579, June.
    2. Vahagn Jerbashian & Anna Kochanova, 2017. "The Impact of Telecommunication Technologies on Competition in Services and Goods Markets: Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(3), pages 628-655, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jerbashian Vahagn, 2016. "Knowledge licensing in a model of R&D-driven endogenous growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 555-579, June.
    2. Jerbashian, Vahagn, 2021. "Intellectual Property And Product Market Competition Regulations In A Model With Two R&D Performing Sectors," Macroeconomic Dynamics, Cambridge University Press, vol. 25(1), pages 59-80, January.
    3. Vincent Van Roy & Daniel Nepelski, 2016. "Assessment of Framework Conditions for the Creation and Growth of Firms in Europe," JRC Research Reports JRC103350, Joint Research Centre.
    4. Bucci, Alberto & Parello, Carmelo Pierpaolo, 2009. "Horizontal innovation-based growth and product market competition," Economic Modelling, Elsevier, vol. 26(1), pages 213-221, January.
    5. Alberto Bucci, 2005. "An Inverted-U Relationship between Product Market Competition and Growth in an Extended Romerian Model," Rivista di Politica Economica, SIPI Spa, vol. 95(5), pages 177-206, September.
    6. Charles Bérubé & Marc Duhamel & Daniel Ershov, 2012. "Market Incentives for Business Innovation: Results from Canada," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 47-65, March.
    7. Kumar, Ronald Ravinesh & Stauvermann, Peter Josef & Samitas, Aristeidis, 2016. "The effects of ICT⁎ on output per worker: A study of the Chinese economy," Telecommunications Policy, Elsevier, vol. 40(2), pages 102-115.
    8. Ronald Ravinesh Kumar & Peter Josef Stauvermann & Syed Jawad Hussain Shahzad, 2017. "Can technology provide a glimmer of hope for economic growth in the midst of chaos? A case of Zimbabwe," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(2), pages 919-939, March.
    9. Benavente, Jose Miguel & Zuniga, Pluvia, 2021. "How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms," MERIT Working Papers 2021-024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Aurelien Quignon, 2022. "Market Regulation and Innovation: Direct and Indirect Effects," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 429-456, December.
    11. Kumar, Ronald Ravinesh & Kumar, Radika Devi & Patel, Arvind, 2015. "Accounting for telecommunications contribution to economic growth: A study of Small Pacific Island States," Telecommunications Policy, Elsevier, vol. 39(3), pages 284-295.
    12. Liliana Meza-González & Jaime Marie Sepulveda, 2019. "The impact of competition with China in the US market on innovation in Mexican manufacturing firms," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-21, December.
    13. Rut Atayde & Rafael Garduño & Eduardo Robles & Pluvia Zúñiga, 2021. "Market competition and firm productivity and innovation: Responses in Mexican manufacturing industries," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1185-1214, August.
    14. Ronald Kumar, 2014. "Exploring the role of technology, tourism and financial development: an empirical study of Vietnam," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2881-2898, September.
    15. Benavente, José Miguel & Zuñiga, Pluvia, 2022. "How Does Market Competition Affect Firm Innovation Incentives in Emerging Countries? Evidence from Chile and Colombia," IDB Publications (Working Papers) 12198, Inter-American Development Bank.
    16. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    17. Luca Farè, 2022. "Exploring the contribution of micro firms to innovation: does competition matter?," Small Business Economics, Springer, vol. 59(3), pages 1081-1113, October.
    18. Thomas Strobel, 2012. "New evidence on the sources of EU countries’ productivity growth—industry growth differences from R&D and competition," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(3), pages 293-325, August.
    19. MARSCHINSKI Robert & DE AMORES HERNANDEZ Antonio & AMOROSO Sara & BAUER Peter & CARDANI Roberta & CSEFALVAY Zoltan & GENTY Aurelien & GKOTSIS Petros & GREGORI Wildmer & GRASSANO Nicola & HERNANDEZ GUE, 2021. "EU competitiveness: recent trends, drivers, and links to economic policy: A Synthesis Report," JRC Research Reports JRC123232, Joint Research Centre.
    20. Volker Grossmann & Thomas Steger, 2007. "Growth, Development, and Technological Change," CESifo Working Paper Series 1913, CESifo.

    More about this item

    Keywords

    Telecommunications industry; Market structure; Economic growth;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:51:y:2015:i:c:p:515-523. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.