This paper examines the impact of transaction costs on economic welfare and development. We extend the static model of Romer (1994), in which transaction costs reduce welfare by the reducing the equilibrium number of intermediate goods, and estimate the welfare losses in the case of domestic...

This paper explores potential channels through which information technology (IT) affects economic development. The channel emphasized here is the reduction of transaction costs through the use of information technology. We discuss the nature of transaction costs, their possible impacts on...