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Infrastructure and Evolution in Division of Labor
Author(s) -
Wen Mei
Publication year - 1997
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00013
Subject(s) - division of labour , transaction cost , economics , division (mathematics) , unit (ring theory) , microeconomics , labour economics , database transaction , path (computing) , market economy , computer science , mathematics education , arithmetic , mathematics , programming language
This paper studies the relationship between infrastructure expenditure and endogenous growth generated by spontaneous evolution of division of labor. It identifies the necessary condition for infrastructure expenditure to take place and its equilibrium time path. Dynamic equilibrium shows that the optimal infrastructure expenditure, the size of the market network, and the level of division of labor increase concurrently. While infrastructure can promote the evolution of division of labor through reducing the unit transaction cost, the total transaction cost each consumer‐producer incurs rises as the optimal share of the infrastructure expenditure increases with economic development.