Endogenous Economic Growth through Connectivity

van Zon, Adriaan and Mupela, Evans (2010). Endogenous Economic Growth through Connectivity. UNU-MERIT.

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  • Sub-type Working paper
    Author van Zon, Adriaan
    Mupela, Evans
    Title Endogenous Economic Growth through Connectivity
    Publication Date 2010
    Place of Publication Maastricht, NL
    Publisher UNU-MERIT
    Pages n/a
    Abstract In this paper we show the benefits of regional connectivity and specialization to growth. Starting with one region we show how welfare measured by utility per head increases as the number of connected regions increase. We assume a common connectivity infrastructure implemented by satellite, through which the ‘Great Connector’ (GC) is able to add new regions to the pool of connected regions by taking a tax form those already connected. We find that increasing production costs leads to faster transitions towards the steady state whereas increasing transportation and communication costs tends to lengthen the transition. The results point to reductions in transportation and communication costs in particular as a suitable vehicle to speed up growth. The results also show a strong positive effect of reductions in the cost of making new connections. This has a significant impact on both the steady state growth rate and on transitional growth, while significantly reducing the transition period.
    Keyword Connectivity
    Satellite
    Growth
    Specialization
    Network
    JEL O25
    041
    O43
    O47
    F15
    F43
    Copyright Holder UNU-MERIT
    Copyright Year 2010
    Copyright type All rights reserved
    ISSN 18719872
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    Created: Wed, 11 Dec 2013, 16:36:47 JST