Institutions and the Scale Effect. CDMA working paper 0906

Trew, A. (2009) Institutions and the Scale Effect. CDMA working paper 0906. Working Paper. Centre for Dynamic Macroeconomic Analysis.

Abstract

Growth models which imply a scale effect are commonly refuted on the basis of empir?ical evidence. A focus on the extent of the market as opposed to the scale of the country has led recent studies to reconsider the role that country scale plays when conditioning on other factors. We consider a variant of a simple learning by doing model to account for the potential role for institutions in determining the strength ¨C and direction ¨C of the scale effect. Using cross-country data, we find a significant interaction between property rights institutions and the effect of scale on long-run growth: In countries with poor prop?erty rights institutions, scale is positively related with income per capita; where property rights institutions are good, higher scale is associated with lower per capita incomes. We find no evidence of such role for contracting institutions.

• Item Type: Research Reports or Papers (Working Paper)
• Status: Published
• Glasgow Author(s) Enlighten ID: Trew, Professor Alex
• Authors: Trew, A.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Publisher: Centre for Dynamic Macroeconomic Analysis