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Endogenous Economic Growth through Connectivity

Author

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  • Zon, Adriaan van

    (UNU-MERIT, and Maastricht University)

  • Mupela, Evans

    (UNU-MERIT)

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.

Suggested Citation

  • Zon, Adriaan van & Mupela, Evans, 2010. "Endogenous Economic Growth through Connectivity," MERIT Working Papers 2010-001, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2010001
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    Cited by:

    1. Hall, Andy & Clark, Norman & Frost, Andy, 2010. "Bottom-up, Bottom-line: Development-Relevant Enterprises in East Africa and their Significance for Agricultural Innovation," MERIT Working Papers 2010-042, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Guennif, Samir & Ramani, Shyama, 2010. "Catching up in pharmaceuticals: a comparative study of India and Brazil," MERIT Working Papers 2010-019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1129-1155, Elsevier.
    4. Zon, Adriaan van & Wiebe, Kirsten, 2010. "Efficient Development Portfolio Design for Sub Saharan Africa," MERIT Working Papers 2010-050, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Pant, Laxmi P., 2010. "Assessing Innovations in International Research and Development Practice," MERIT Working Papers 2010-043, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    6. Garcia, Abraham & Mohnen, Pierre, 2010. "Impact of government support on R&D and innovation," MERIT Working Papers 2010-034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Carvalho, Flavia & Costa, Ionara & Duysters, Geert, 2010. "Global Players from Brazil: drivers and challenges in the internationalization process of Brazilian firms," MERIT Working Papers 2010-016, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    8. Zhang, Ying & Duysters, Geert, 2010. "Entrepreneurship Development and the Role of Economic Transition in Entrepreneurial Activities in China," MERIT Working Papers 2010-036, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Akcomak, Semih & Stoneman, Paul, 2010. "How novel is social capital: Three cases from the British history that reflect social capital," MERIT Working Papers 2010-015, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Kaplinsky, Raphael & Chataway, Joanna & Clark, Norman & Hanlin, Rebecca & Kale, Dinar & Muraguri, Lois & Papaioannou, Theo & Robbins, Peter & Wamae, Watu, 2010. "Below the Radar: What does Innovation in Emerging Economies have to offer other Low Income Economies?," MERIT Working Papers 2010-020, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. Samira Guennif & Shyama V. Ramani, 2010. "Catching up in pharmaceuticals: a comparative study of India and Brazil," Working Papers hal-00632439, HAL.

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    More about this item

    Keywords

    Connectivity; Satellites; Growth; Specialization; Networks;
    All these keywords.

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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