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Transaction Costs, Information Technology and Development

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  • Singh, Nirvikar

Abstract

This paper explores potential channels through which information technology (IT) affects economic development. The channel emphasized here is the reduction of transaction costs through the use of information technology. We discuss the nature of transaction costs, their possible impacts on economic outcomes, and the impacts of IT on transaction costs. We provide a theoretical discussion of how a reduction in transaction costs may affect the number of intermediate goods that are produced, and in turn how that number may affect the development path of the economy. We then draw on our fieldwork in rural India that examined the economics of rural Internet kiosks, and relate this multifaceted case study to the theoretical discussion of transaction costs. We conclude with a broader discussion of the potential impact of IT on developing economies.

Suggested Citation

  • Singh, Nirvikar, 2004. "Transaction Costs, Information Technology and Development," Santa Cruz Department of Economics, Working Paper Series qt1460z68n, Department of Economics, UC Santa Cruz.
  • Handle: RePEc:cdl:ucscec:qt1460z68n
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    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. 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.
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    4. 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.
    5. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-439, May.
    6. 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.
    7. repec:zbw:bofitp:2003_017 is not listed on IDEAS
    8. 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).
    9. Singh, Nirvikar, 2004. "Information Technology and Rural Development in India," Santa Cruz Center for International Economics, Working Paper Series qt9wj6d6kv, Center for International Economics, UC Santa Cruz.
    10. Nirvikar Singh, 2003. "India's Information Technology Sector: What Contribution to Broader Economic Development?," OECD Development Centre Working Papers 207, OECD Publishing.
    11. 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.
    12. Foley, Duncan K., 1970. "Economic equilibrium with costly marketing," Journal of Economic Theory, Elsevier, vol. 2(3), pages 276-291, September.
    13. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
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    Cited by:

    1. Jake Kendall & Nirvikar Singh, 2006. "Internet Kiosks in Rural India: What Influences Success?," Working Papers 06-05, NET Institute, revised Sep 2006.
    2. 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(01), March.

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    Keywords

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    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

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