Cost-Based Models of Economic Growth

Daniel Cardona and Fernando Sánchez-Losada

No 179, Working Papers in Economics from Universitat de Barcelona. Espai de Recerca en Economia

Abstract: In this paper we highlight the importance of the operational costs in explaining economic growth and analyze how the industrial structure affects the growth rate of the economy. If there is monopolistic competition only in an intermediate goods sector, then production growth coincides with consumption growth. Moreover, the pattern of growth depends on the particular form of the operational cost. If the monopolistically competitive sector is the final goods sector, then per capita production is constant but per capita effective consumption or welfare grows. Finally, we modify again the industrial structure of the economy and show an economy with two different growth speeds, one for production and another for effective consumption. Thus, both the operational cost and the particular structure of the sector that produces the final goods determines ultimately the pattern of growth.

JEL-codes: O40 O41 O47 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007
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