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Economic Systems and Economic Growth

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  • Zhou, Haiwen

Abstract

In a planned economy, state monopoly ensures that economies of scale are exploited. However, state monopoly could not commit to reward its workers. Anticipating this, individuals will exert less effort. In a market economy, competition among firms ensures that higher effort from workers will be rewarded. However, competition means that economies of scale are not fully exploited. Per capita output growth is generated by continuous adoption of new technologies substituting labor for capital. Growth rate in a market economy is higher than that in a planned economy when the incentive to exert effort is relatively more important.

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  • Zhou, Haiwen, 2018. "Economic Systems and Economic Growth," MPRA Paper 87244, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87244
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    File URL: https://mpra.ub.uni-muenchen.de/87244/1/MPRA_paper_87244.pdf
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    References listed on IDEAS

    as
    1. Haiwen Zhou, 2004. "The division of labor and the extent of the market," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 195-209, July.
    2. Yingyi Qian & Chenggang Xu, 1993. "Why China's economic reforms differ: the M‐form hierarchy and entry/expansion of the non‐state sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(2), pages 135-170, June.
    3. M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 541-555.
    4. Haiwen Zhou, 2009. "Population Growth And Industrialization," Economic Inquiry, Western Economic Association International, vol. 47(2), pages 249-265, April.
    5. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 707-738.
    6. Wei Li, 1999. "A Tale of Two Reforms," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 120-136, Spring.
    7. Duranton, Gilles & Haniotis, Toni, 2004. "A comparison between economic systems with an application to transition," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2125-2157, August.
    8. Oskar Lange, 1937. "On the Economic Theory of Socialism: Part Two," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 123-142.
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    Citations

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    Cited by:

    1. Haiwen Zhou, 2021. "Fixed Costs and the Division of Labor," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 63-81, May.
    2. Zhu, Xinhua & Qian, Tiannan & Wei, Yigang, 2020. "Do high-speed railways accelerate urban land expansion in China? A study based on the multi-stage difference-in-differences model," Socio-Economic Planning Sciences, Elsevier, vol. 71(C).
    3. Haiwen Zhou, 2014. "Intermediate Inputs and External Economies," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 9(2), pages 216-239, June.
    4. Wang, Chunyang & Meng, Weidong & Hou, Xinshuo, 2020. "The impact of high-speed rails on urban economy: An investigation using night lighting data of Chinese cities," Research in Transportation Economics, Elsevier, vol. 80(C).
    5. Haiwen Zhou, 2023. "State Capacity and Leadership: Why Did China Take off?," Chinese Economy, Taylor & Francis Journals, vol. 56(1), pages 50-68, January.
    6. Haiwen Zhou, 2021. "Culture, institutions, and long‐run performance," Pacific Economic Review, Wiley Blackwell, vol. 26(3), pages 372-391, August.
    7. Zhou, Haiwen, 2017. "Will China Avoid the Middle-Income Trap?," MPRA Paper 82688, University Library of Munich, Germany.

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    More about this item

    Keywords

    Market economy; Planned economy; Economic growth; Competition; Monopoly;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

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    This paper has been announced in the following NEP Reports:

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