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This paper looks at the importance of scale economies – defined in terms of the benefits from innovation – from both a theoretical and an empirical perspective. We argue that one can only gauge the degree of scale economies at the industry level by taking account of the degree of specialization – he...
| Main Authors: | , |
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| Format: | Text |
| Language: | English |
| Published: |
2002
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| Online Access: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.202.9964 http://www.ioes.hi.is/publications/wp/W0210.pdf |
| Summary: | This paper looks at the importance of scale economies – defined in terms of the benefits from innovation – from both a theoretical and an empirical perspective. We argue that one can only gauge the degree of scale economies at the industry level by taking account of the degree of specialization – hence the reliance on international trade – as well as the size of an economy. We show that in Iceland specialization in fishing results in a sector which ranks 13 th in the world, hence belying the small size of the population and the overall economy. Not surprisingly, the bulk of R&D in Iceland is focused on providing this industry with an ever-expanding range of inputs, resulting in a high rate of growth of GDP – as well as a high standard of living in the country as a whole – in comparison with other OECD economies. JEL Classification System: Q2, Q3, O1 Keywords: Economies of scale, R&D, Icelandic economic history. |
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