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Transaction Costs, Information Technology and Development


  • Singh, Nirvikar


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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    References listed on IDEAS

    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 Economies in Transition.
    2. John Whalley, 2008. "Globalisation and Values," The World Economy, Wiley Blackwell, vol. 31(11), pages 1503-1524, November.
    3. Singh, Nirvikar, 2004. "Information Technology and Rural Development in India," Santa Cruz Department of Economics, Working Paper Series qt9vh2m7z0, Department of Economics, UC Santa Cruz.
    4. 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.
    5. 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.
    6. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 331-360.
    7. 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.
    8. 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.
    9. Nirvikar Singh, 2003. "India's Information Technology Sector: What Contribution to Broader Economic Development?," OECD Development Centre Working Papers 207, OECD Publishing.
    10. Dale W. Jorgenson, 2007. "Information Technology and the G7 Economies," NBER Chapters,in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 325-350 National Bureau of Economic Research, Inc.
    11. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-439, May.
    12. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December.
    13. Francesco Daveri, 2003. "Information Technology and Productivity Growth Across Countries and Sectors," Working Papers 227, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    14. Nirvikar Singh, 2004. "Information Technology as an Engine of Broad-Based Growth in India," Development and Comp Systems 0412012, EconWPA.
    15. David Hummels & Peter J. Klenow, 2002. "The Variety and Quality of a Nation's Trade," NBER Working Papers 8712, National Bureau of Economic Research, Inc.
    16. Foley, Duncan K., 1970. "Economic equilibrium with costly marketing," Journal of Economic Theory, Elsevier, vol. 2(3), pages 276-291, September.
    17. 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. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 331-360.
    2. repec:wsi:wepxxx:v:03:y:2017:i:01:n:s2382624x1650020x is not listed on IDEAS

    More about this item


    transaction costs; information technology; Internet; development; India;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • P2 - Economic Systems - - Socialist Systems and Transition Economies


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