Appropriate Wage to Economies of Scale for Growth: An Exploratory Study on New Paradigm for Development
Abstract Since long the economies of scale is mainly acknowledged in microeconomics. Alas, in macroeconomics field, the prevailing principle is the constant return to scales by rejecting the economies of scale without justifiable reasoning. But fixed costs and indivisibilities are widely present in the economic activities. Urbanization takes benefits from economies of scale. Presently the idea of economies of scale in macroeconomics is in the ascent stage. The principle states that higher volume of production will have a declining unit cost. Higher production volume is assumed to respond to higher demand, which is enabled by higher labor wage. Raising labor wage rate does not necessarily increase unit cost of production. The wage could be a weighted wages in the sectors of the economy. It is expected that the rise in the labor wage should be less than the decrease of the unit cost, enabling higher sales. Aggregately it leads to a rise in the whole country production or Gross Domestic Product, entailing more jobs creation. A conclusion is that under appropriate conditions the increase in the labor wage rate will raise the GDP, associated with more jobs and better income distribution. This is a potential new developmental paradigm where the increase in the labor wage entails a rise in the GDP, providing more jobs and better distribution of income.
|Date of creation:||25 Sep 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
- Seref Saygili, 1998. "Is the Efficiency Wage Hypothesis Valid for Developing Countries? Evidence from the Turkish Cement Industry," Studies in Economics 9810, School of Economics, University of Kent.
- Koford, Kenneth J & Miller, Jeffrey B, 1992.
"Macroeconomic Market Incentive Plans: History and Theoretical Rationale,"
American Economic Review,
American Economic Association, vol. 82(2), pages 330-34, May.
- Kenneth Koford & Jeffrey B. Miller, 1992. "Macroeconomic Market Incentive Plans: History and Theoretical Rationale," Economics Working Paper Archive wp_71, Levy Economics Institute.
- Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Jang-Sup SHIN, 2002. "The East Asian Industrialization in the Gerschenkronian Mirror: Catching-up Strategies and Institutional Transition," Departmental Working Papers wp0208, National University of Singapore, Department of Economics.
- David Colander, 2008. "Macroeconomic Policy And Collective Action," Middlebury College Working Paper Series 0332, Middlebury College, Department of Economics.
- Jesus Felipe & J. S. L. McCombie, 2005. "WHY ARE SOME COUNTRIES RICHER THAN OTHERS? A SKEPTICAL VIEW OF MANKIW-ROMER-WEIL's TEST OF THE NEOCLASSICAL GROWTH MODEL," Metroeconomica, Wiley Blackwell, vol. 56(3), pages 360-392, 07.
- M. L. Weitzman, 1981. "Increasing Returns and Unemployment Equilibrium," Working papers 291, Massachusetts Institute of Technology (MIT), Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:41581. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.