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Cost-Based Models of Economic Growth

  • Daniel Cardona
  • Fernando Sanchez Losada

    (Universitat de Barcelona)

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.

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Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 179.

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Length: 29 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:bar:bedcje:2007179
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
Web page: http://www.ere.ub.es

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  13. Jaime Alonso-Carrera & Xavier Raurich, 2007. "Growth, Sectoral Composition, And The Wealth Of Nations," CAMA Working Papers 2007-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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  19. 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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