A Hybrid Mode of Production, Transaction, and Economic Growth: Implication of Digitalization

Mandal, Biswajit and Roy Chakraborty, Labani and Sanyal, Alapan (2023): A Hybrid Mode of Production, Transaction, and Economic Growth: Implication of Digitalization.

Abstract

This essay attempts to build a simple theoretical model of optimization to decipher the effect of digitalization of a part of the entire production structure which we call here trading or transaction or marketing. In the basic model we use traditional Cobb -Douglas production function to argue that a shift from offline to online may induce increase in profit and subsequent economic growth. However, the effects are not uniform implying that factor-input ratio or factor-intensity of the trading activity has a role to play in this context. We also find that night time utilization due to digitalization further strengthens our results. We then extend the basic model for a CES production function. And it has been observed there that in CES – case we have similar results but the channels are a little different for that both revenue and cost have similar consequences of digitalization. Nevertheless, the essence of the basic results holds true even in a more generalized case.

• Item Type: MPRA Paper
• Language: English
• Keywords: Digitalization, Selling, Output, Profit, Growth
• Subjects: D - Microeconomics > D0 - General > D00 - General; D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; D - Microeconomics > D3 - Distribution; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

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