Working Paper #2010-001
Endogenous Economic Growth through Connectivity
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.
- Keywords
-
- Connectivity
- Satellite
- Growth
- Specialization
- Network
- JEL codes
-
- O25
- 041
- O43
- O47
- F15
- F43
- UNU-MERIT
- Working
- Papers
- ISSN
- 1871-9872
Cite this as
APA 7th ed.van Zon, A., & Mupela, E. (2010). Endogenous Economic Growth through Connectivity (UNU-MERIT Working Paper No. 2010-001). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=3884