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Economic Systems and Economic Growth


  • Haiwen Zhou



In a planned economy, state monopoly ensures that economies of scale are exploited. However, state monopoly could not commit to reward its workers. Anticipating this, individuals will exert less effort. In a market economy, competition among firms ensures that higher effort from workers will be rewarded. However, competition means that economies of scale are not fully exploited. Per capita output growth is generated by continuous adoption of new technologies substituting labor for capital. Growth rate in a market economy is higher than that in a planned economy when the incentive to exert effort is relatively more important. Copyright International Atlantic Economic Society 2011

Suggested Citation

  • Haiwen Zhou, 2011. "Economic Systems and Economic Growth," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(3), pages 217-229, September.
  • Handle: RePEc:kap:atlecj:v:39:y:2011:i:3:p:217-229
    DOI: 10.1007/s11293-011-9280-4

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    Cited by:

    1. Haiwen Zhou, 2014. "Intermediate Inputs and External Economies," Frontiers of Economics in China, Higher Education Press, vol. 9(2), pages 216-239, June.

    More about this item


    Market economy; Planned economy; Economic growth; Competition; Monopoly; O40; P00;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P00 - Economic Systems - - General - - - General


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