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Cost-Based Models of Economic Growth

Author

Listed:
  • Daniel Cardona
  • Fernando Sanchez Losada

    (Universitat de Barcelona)

Abstract

In this paper we highlight the importance of the operational costs in explaining economic growth and analyze how the industrial structure affects the growth rate of the economy. If there is monopolistic competition only in an intermediate goods sector, then production growth coincides with consumption growth. Moreover, the pattern of growth depends on the particular form of the operational cost. If the monopolistically competitive sector is the final goods sector, then per capita production is constant but per capita effective consumption or welfare grows. Finally, we modify again the industrial structure of the economy and show an economy with two different growth speeds, one for production and another for effective consumption. Thus, both the operational cost and the particular structure of the sector that produces the final goods determines ultimately the pattern of growth.

Suggested Citation

  • Daniel Cardona & Fernando Sanchez Losada, 2007. "Cost-Based Models of Economic Growth," Working Papers in Economics 179, Universitat de Barcelona. Espai de Recerca en Economia.
  • Handle: RePEc:bar:bedcje:2007179
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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