Abstract
This paper considers the effects of the division of labor on economic growth and welfare in a general equilibrium environment where changes in individual specialization and product development can proceed simultaneously. The nature of the dynamic equilibrium is shown to depend on the interaction of transaction efficiency, economies of specialization, and economies of complementarity. Where the dynamic equilibrium involves evolution in the division of labor, this will be associated with increased per capita real income and hence economic growth. It is also shown that the emergence of firms is an aspect of the evolution of division of labor if transaction efficiency for a producer good is lower than that for labor used to produce this good.
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Borland, J., Yang, X. Specialization, product development, evolution of the institution of the firm, and economic growth. J Evol Econ 5, 19–42 (1995). https://doi.org/10.1007/BF01199668
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DOI: https://doi.org/10.1007/BF01199668
Key words
- Emergence and evolution of the firm
- Product development
- Specialization
- Evolution of division labor
- Endogenous technical progress