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A Note on Scale Effects

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  • Hernando Zuleta

    (Universitat Pompeu Fabra)

Abstract

This note presents a simple extension of the seminal Romer (1990, Journal of Political Economy 98(2), 71-102) paper. Allowing for elasticity of substitution between labor and capital to be different from one (CES production function instead of CobbâDouglas), the following results are obtained. (a) The existence of a scale effect depends on the elasticity of substitution between reproducible and not reproducible factors. (b) In the case where the elasticity of substitution is higher than one, (i) there is a scale effect in the long run, (ii) there is a negative scale effect for poor economies, (iii) as economies grow the share of reproducible factors in the national income increases, (iv) as economies grow the share of workers employed in the production of final goods decreases. (Copyright: Elsevier)

Suggested Citation

  • Hernando Zuleta, 2004. "A Note on Scale Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 237-242, January.
  • Handle: RePEc:red:issued:v:7:y:2004:i:1:p:237-242
    DOI: 10.1016/S1094-2025(03)00054-1
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
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    5. Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    8. O'Neill, Donal, 1995. "Education and Income Growth: Implications for Cross-Country Inequality," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1289-1301, December.
    9. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    10. 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.
    11. Brander, James A & Dowrick, Steve, 1994. "The Role of Fertility and Population in Economic Growth: Empirical Results from Aggregate Cross-National Data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(1), pages 1-25.
    12. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
    13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Citations

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    Cited by:

    1. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-72.
    2. Hernando Zuleta, 2008. "Energy Saving Innovations, Non-Exhaustible Sources of Energy and Long-Run: What Would Happen if we Run Out of Oil?," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, November.
    3. Ferrarini, Benno & Scaramozzino, Pasquale, 2016. "Production complexity, adaptability and economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 52-61.
    4. Hernando Zuleta, 2011. "Factor Shares, Income Distribution and Capital Flows," DEGIT Conference Papers c016_003, DEGIT, Dynamics, Economic Growth, and International Trade.
    5. Benno Ferrarini & Pasquale Scaramozzino, 2013. "Complexity, Specialization and Growth," CEIS Research Paper 275, Tor Vergata University, CEIS, revised 30 Apr 2013.
    6. Hernando Zuleta, 2015. "Factor shares, inequality, and capital flows," Southern Economic Journal, Southern Economic Association, vol. 82(2), pages 647-667, October.
    7. Gómez, Manuel A., 2008. "Dynamics Of The Saving Rate In The Neoclassical Growth Model With Ces Production," Macroeconomic Dynamics, Cambridge University Press, vol. 12(02), pages 195-210, April.
    8. Zuleta, Hernando & Young, Andrew T., 2013. "Labor shares in a model of induced innovation," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 112-122.
    9. Carlos Esteban Posada P., 2004. "Causas del desarrollo y mecánica del crecimiento," Method and Hist of Econ Thought 0411003, EconWPA.

    More about this item

    Keywords

    Growth; Capital income share; Transition; Scale effects;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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