Economic Systems and Economic Growth

Zhou, Haiwen (2018): Economic Systems and Economic Growth. Published in: Atlantic Economic Journal , Vol. 39, No. 3 (2011): pp. 217-229.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Market economy, Planned economy, Economic growth, Competition, Monopoly
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; P - Economic Systems > P5 - Comparative Economic Systems > P50 - General

References

References

Blanchard, Olivier, and Michael Kremer. 1997. Disorganization. Quarterly Journal of Economics, 112, 1091-1126.

Dewatripont, M., and Eric Maskin. 1995. Credit and efficiency in centralized and decentralized economies. Review of Economic Studies, 62, 541-555.

Duranton, Gilles, and Toni Haniotis. 2004. A comparison between economic systems with an application to transition. Journal of Public Economics, 88, 2125-2157.

Gorbachev, Mikhail. 1987. Perestroika: New Thinking for Our Country and the World. New York: Harper & Row Publishers.

Hayek, Friedrich. 1944. The Road to Serfdom. Chicago, IL: University of Chicago Press.

Kornai, Janos. 1980. Economics of Shortage. Amsterdam: North Holland.

Lange, Oscar. 1937. On the economic theory of socialism: Part two. Review of Economic Studies, 4, 123-142.

Lahiri, Sajal, and Yoshiyasu Ono. 2004. Trade and Industrial Policy under International Oligopoly. Cambridge, UK: Cambridge University Press.

Levinson, Marc. 2006. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Princeton, NJ: Princeton University Press.

Li, Wei. 1999. A tale of two reforms. Rand Journal of Economics, 30, 120-136.

Lin, Yifu, Fang Cai, and Li Zhou. 2003. The China Miracle: Development Strategy and Economic Reform. Hong Kong: The Chinese University Press.

Olson, Mancur. 2000. Power and Prosperity. New York, NY: Basic Books.

Qian, Yingyi, and Chenggang Xu. 1993. Why China's economic reforms differ: The M-Form hierarchy and entry/expansion of the non-state sector. Economics of Transition, 1, 135-170.

Rodrik, Dani. 1999. Democracies pay higher wages. Quarterly Journal of Economics, 114, 707-738.

Zhou, Haiwen. 2004. The division of labor and the extent of the market. Economic Theory, 24, 195-209.

Zhou, Haiwen. 2009. Population growth and industrialization. Economic Inquiry, 47, 247-265.