Chandra, R. and Sandilands, R.J. (2006) The role of pecuniary external economies and increasing returns to scale in the theory of increasing returns. Review of Political Economy, 18 (2). pp. 193-208. ISSN 0953-8259Full text not available in this repository. (Request a copy from the Strathclyde author)
This paper investigates some issues relating to the phenomenon of increasing returns: (1) What is the role of economies of scale in the theory of increasing returns? (2) Do pecuniary external economies lead to market failure and justify intervention in the market mechanism? (3) Are increasing returns sector-specific or generalised, and if they are sector specific, is it possible to identify and promote these sectors from a policy point of view? We argue that economies of scale are incidental to the broader phenomenon of increasing returns and therefore cannot adequately explain their existence. On the second question, we argue that the presence of pecuniary external economies is characteristic of a well-functioning market system rather than an indication of its failure. Finally, increasing returns are generalised, so that policies intended to identify and promote specific sectors will tend to distort intersectoral relationships. Sector-specific polices should not be based on the logic of increasing returns, but should aim to correct sector-specific handicaps.
|Keywords:||economics, markets, economic growth, econometrics, Economic Theory, Political Science and International Relations, Economics, Econometrics and Finance (miscellaneous)|
|Subjects:||Social Sciences > Economic Theory|
|Department:||Strathclyde Business School > Economics|
|Depositing user:||Strathprints Administrator|
|Date Deposited:||22 Aug 2007|
|Last modified:||29 Apr 2016 07:50|