The Transaction Costs Perspective on Standards as a Source of Trade and Productivity Growth

Tinbergen Institute Discussion Paper No. 07-090/3

27 Pages Posted: 26 Nov 2007

See all articles by Frank A. G. den Butter

Frank A. G. den Butter

Vrije Universiteit Amsterdam - Economics

Stefan P. T. Groot

VU University Amsterdam

Faroek Lazrak

VU University Amsterdam

Date Written: November 2007

Abstract

This paper discusses the design, implementation and use of standards from the perspective of transaction costs economics. A proper design and implementation of standards may lead to a considerable reduction of transaction costs, which enhances trade and, consequently, economic welfare. A major example is the use of containers, which has drastically changed the worldwide transport infrastructure, and lowered the costs of transport of goods considerably. The example of containers also shows that network externalities play a major role in the use of standards, and that, on the other hand, worldwide standards with large sunk investment costs may lead to a lock-in. This may call for government intervention in the design and use of standards, and in the transition processes to new standards. The paper provides ample further examples of standards and on the role of the government, or clubs, with respect to these standards.

Keywords: standards, transaction costs, innovations, lock-ins, network externalities, international trade

JEL Classification: L15, L16, L17

Suggested Citation

den Butter, Frank A. G. and Groot, Stefan P. T. and Lazrak, Faroek, The Transaction Costs Perspective on Standards as a Source of Trade and Productivity Growth (November 2007). Tinbergen Institute Discussion Paper No. 07-090/3, Available at SSRN: https://ssrn.com/abstract=1032135 or http://dx.doi.org/10.2139/ssrn.1032135

Frank A. G. Den Butter (Contact Author)

Vrije Universiteit Amsterdam - Economics ( email )

Boelelaan 1105
NL 1081 HV Amsterdam
Netherlands
+31 20 444 6030 (Phone)

Stefan P. T. Groot

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Faroek Lazrak

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

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