IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Scale effects in growth: A role for institutions

  • Davis, Lewis S.
Registered author(s):

    Reliance on a Dixit-Stiglitz production function leads the growth literature naïvely to associate economic scale with the size of a country's population. I develop an alternative approach in which market size is endogenous, reflecting a trade-off between the gains to exploiting non-rival skills and market transaction costs. Transaction costs reflect a country's institutional framework. The model supports scale effects in transitional growth rates and steady state income levels, suggesting scale effects may be important for developing countries. In this framework effective market size depends on a country's institutions. It is independent of population size and other macroeconomic variables.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-2681(06)00308-8
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 66 (2008)
    Issue (Month): 2 (May)
    Pages: 403-419

    as
    in new window

    Handle: RePEc:eee:jeborg:v:66:y:2008:i:2:p:403-419
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

    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.:

    as in new window
    1. Davis, Lewis S., 2006. "Growing apart: The division of labor and the breakdown of informal institutions," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 75-91, March.
    2. Romer, Paul M, 1996. "Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth," American Economic Review, American Economic Association, vol. 86(2), pages 202-06, May.
    3. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
    4. Becker, G.S. & Murphy, K.M., 1991. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - Economics Research Center 92-5, Chicago - Economics Research Center.
    5. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    6. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    7. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
    8. Sebastian Edwards, 1997. "Openness, Productivity and Growth: What Do We Really Know?," NBER Working Papers 5978, National Bureau of Economic Research, Inc.
    9. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, vol. 61(2), pages 251-72, March.
    10. Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
    11. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    12. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
    13. Charles I. Jones, 2002. "Sources of U.S. Economic Growth in a World of Ideas," American Economic Review, American Economic Association, vol. 92(1), pages 220-239, March.
    14. Tamura, Robert, 1996. "Regional economies and market integration," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 825-845, May.
    15. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    16. Alberto F. Ades & Edward L. Glaeser, 1999. "Evidence on Growth, Increasing Returns, and the Extent of the Market," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 1025-1045.
    17. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    18. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-25, December.
    19. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
    20. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    21. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    22. Charles I. Jones, . "Growth: With or Without Scale Effects?," Working Papers 99001, Stanford University, Department of Economics.
    23. 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.
    24. Alberto Alesina & Enrico Spolaore & Romain Wacziarg, 1997. "Economic Integration and Political Disintegration," NBER Working Papers 6163, National Bureau of Economic Research, Inc.
    25. David K. Backus & Patrick J. Kehoe & Timothy J. Kehoe, 1992. "In search of scale effects in trade and growth," Staff Report 152, Federal Reserve Bank of Minneapolis.
    26. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
    27. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents 1971-2, Nobel Prize Committee.
    28. Lewis S. Davis, 2003. "Toward a Unified Transaction Cost Theory of Economic Organization," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(3), pages 571-, September.
    29. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
    30. Davis, Lewis S., 2003. "The division of labor and the growth of government," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1217-1235, May.
    31. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
    32. Tamura, Robert, 2002. "Human capital and the switch from agriculture to industry," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 207-242, December.
    33. Michael Kremer, 1993. "Population Growth and Technological Change: One Million B.C. to 1990," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 681-716.
    34. Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030, December.
    35. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June.
    36. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
    37. Kenneth L. Sokoloff, 1988. "Inventive Activity in Early Industrial America: Evidence From Patent Records, 1790 - 1846," NBER Working Papers 2707, National Bureau of Economic Research, Inc.
    38. Elias Dinopoulos & Peter Thompson, 1999. "Scale effects in Schumpeterian models of economic growth," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 157-185.
    39. Tamura, R., 1991. "Efficient Equilibrium Convergence : Heterogeneity and Growth," Working Papers 91-16, University of Iowa, Department of Economics.
    40. repec:fth:harver:1473 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:66:y:2008:i:2:p:403-419. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.