IDEAS home Printed from https://ideas.repec.org/a/eme/igdrpp/v1y2008i2p212-236.html
   My bibliography  Save this article

Transaction costs, information technology and development

Author

Listed:
  • Nirvikar Singh

Abstract

Purpose - The purpose of this paper is to examine the impact of transaction costs on economic welfare and development, and the role of information technology (IT) in reducing transaction costs. Design/methodology/approach - The paper extends the static model of Romer, in which transaction costs reduce welfare by 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 to incorporate transaction costs. Also described are case studies of the use of IT in rural India. Findings - In the static model, it is shown that domestic transaction costs have a substantial welfare impact when the number of goods is endogenous. In the dynamic model, it is shown that high transaction costs reduce the long‐run level of development, and may arrest development completely in the extreme case. Some preliminary, qualitative evidence from rural India is offered to illustrate how these reductions may occur through the use of IT. Originality/value - The treatment of transaction costs in a dynamic model is novel, and the use of such a model provides a new theoretical underpinning for understanding the potential impacts of IT on development.

Suggested Citation

  • Nirvikar Singh, 2008. "Transaction costs, information technology and development," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 1(2), pages 212-236, September.
    • Handle: RePEc:eme:igdrpp:v:1:y:2008:i:2:p:212-236
    DOI: 10.1108/17538250810903792
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/17538250810903792/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/17538250810903792/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/17538250810903792?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. 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).
    2. John Whalley, 2008. "Globalisation and Values," The World Economy, Wiley Blackwell, vol. 31(11), pages 1503-1524, November.
    3. Singh, Nirvikar, 2004. "Information Technology and Rural Development in India," Santa Cruz Department of Economics, Working Paper Series qt9wj6d6kv, Department of Economics, UC Santa Cruz.
    4. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
    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.
    6. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 331-360.
    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. Singh, Nirvikar, 2004. "Information Technology and Rural Development in India," Santa Cruz Department of Economics, Working Paper Series qt9wj6d6kv, Department of Economics, UC Santa Cruz.
    13. 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.
    14. 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.
    15. Francesco Daveri, 2003. "Information Technology and Productivity Growth Across Countries and Sectors," Working Papers 227, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. 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.
    17. repec:zbw:bofitp:2003_017 is not listed on IDEAS
    18. 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.
    19. Foley, Duncan K., 1970. "Economic equilibrium with costly marketing," Journal of Economic Theory, Elsevier, vol. 2(3), pages 276-291, September.
    20. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
    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. 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.

    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. Singh, Nirvikar, 2006. "Services-led industrialization in India: Assessment and lessons," MPRA Paper 1276, University Library of Munich, Germany.
    2. Singh, Nirvikar, 2006. "ICTs and rural development in India," MPRA Paper 1274, University Library of Munich, Germany.
    3. Jake Kendall & Nirvikar Singh, 2006. "Internet Kiosks in Rural India: What Influences Success?," Working Papers 06-05, NET Institute, revised Sep 2006.
    4. 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.
    5. Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andres Rodriguez-Clare, 2008. "Endogenous Variety and the Gains from Trade," American Economic Review, American Economic Association, vol. 98(2), pages 444-450, May.
    6. Jake Kendall & Nirvikar Singh & Kristin Williams & Yan Zhou & P.D. Kaushik, 2007. "Network Economics and the Digital Divide in Rural India," Working Papers 07-29, NET Institute, revised Sep 2007.
    7. Christodoulopoulou, Styliani, 2010. "THE Effects of Multilateral Trade Liberalization on the Extensive and the Intensive Margins of Trade," MPRA Paper 29169, University Library of Munich, Germany.
    8. Nirvikar Singh & Yan Zhou & Kristen Williams & Jake Kendall & P.D. Kaushik, 2013. "Bridging the Digital Divide in Rural India," Review of Market Integration, India Development Foundation, vol. 5(1), pages 1-42, April.
    9. Singh, Nirvikar, 2004. "Information Technology and Rural Development in India," Santa Cruz Department of Economics, Working Paper Series qt9wj6d6kv, Department of Economics, UC Santa Cruz.
    10. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
    11. Das, Bibhunandini, 2019. "What Determines Computer literacy across Indian Household? A State-level Analysis," MPRA Paper 109526, University Library of Munich, Germany.
    12. Jake Kendall & Nirvikar Singh & Kristin Williams & Yan Zhou & P.D. Kaushik, 2007. "Network Economics and the Digital Divide in Rural South Asia," Working Papers 07-30, NET Institute, revised Sep 2007.
    13. Richard Frensch, 2008. "Trade liberalisation, adoption costs, and import margins in CEEC and OECD trade," Working Papers 269, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    14. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170, Elsevier.
    15. Ardelean, Adina & Lugovskyy, Volodymyr, 2010. "Domestic productivity and variety gains from trade," Journal of International Economics, Elsevier, vol. 80(2), pages 280-291, March.
    16. Colantone, Italo & Crinò, Rosario, 2014. "New imported inputs, new domestic products," Journal of International Economics, Elsevier, vol. 92(1), pages 147-165.
    17. Fernando Lera & Margarita Billón, 2004. "The North-South Digital Divide in Information and Communication Technologies Development: the Case for Spanish Regions," ERSA conference papers ersa04p307, European Regional Science Association.
    18. Gaël Giraud & Nguenamadji Orntangar, 2011. "Monetary policy under finite speed of trades and myopia," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00609824, HAL.
    19. Starr, Ross M., 1999. "Why is there Money? Convergence to a Monetary Equilibrium in a General Equilibrium Model with Transaction Costs," University of California at San Diego, Economics Working Paper Series qt253553nn, Department of Economics, UC San Diego.
    20. Starr, Ross M., 2002. "Existence of Uniqueness of "Money" in General Equilibrium: Natural Monopoly in the Most Liquid Asset," University of California at San Diego, Economics Working Paper Series qt660465rm, Department of Economics, UC San Diego.

    More about this item

    Keywords

    Transaction costs; Internet; Economic development; Rural areas; India; Communication technologies;
    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

    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:eme:igdrpp:v:1:y:2008:i:2:p:212-236. 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: Emerald Support (email available below). General contact details of provider: .

    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.