INCREASING RETURNS AND ENDOGENOUS GROWTH: MARKET SIZE AND TASTE FOR VARIETY

Ana Paula Martins

Academica Science Journal, Economica Series, 2015, vol. 1, issue 5, 3-33

Abstract: : This paper studies some implications of the existence of Increasing Returns to Scale in the generation of persistent growth in the economy. In a standard neoclassical one-sector model, the optimal growth rate will be proportional to the rate of population growth. If economies of scale are internal to particular markets and we assume that firms perceive their production functions as CRS, a symmetric equilibrium applied to the model illustrates an example of market failure in promoting its own integration. Steady-state growth may be indeterminate and less than optimal. If one considers that consumers have taste for variety and a multiproduct economy where there are economies of scale internal to each market, one concludes that the equilibrium growth rate maybe higher or lower than optimal. The efficient outcome will lead to higher growth rates for countries with less intense taste for variety and vice-versa.

Keywords: Endogenous Growth; One-Sector Growth Models; Consumer Variety; Equilibrium Growth Indeterminacy; Increasing Returns to Scale; Growth and Economic Integration. (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://academica.udcantemir.ro/wp-content/uploads/article/economica/e5/E5A1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tig:journl:v:1:y:2015:i:5:p:3-33

Access Statistics for this article

More articles in Academica Science Journal, Economica Series from Dimitrie Cantemir University, Faculty of Economical Science
Bibliographic data for series maintained by Maria Oroian ().