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Division of Labor, Money, and Economic Progress
Author(s) -
Cheng Wen Li
Publication year - 1999
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 - 10.1111/1467-9361.00073
Subject(s) - division of labour , economics , division (mathematics) , adam smith , welfare , general equilibrium theory , endogenous money , labour economics , economic welfare , keynesian economics , neoclassical economics , monetary economics , macroeconomics , monetary policy , market economy , arithmetic , mathematics
This paper develops a general equilibrium model to formalize Adam Smith’s insight on the relationship between the division of labor, the emergence of money, and economic progress. The model demonstrates that the division of labor is the driving force behind the emergence of money, and the use of money in turn stimulates further division of labor. It also shows that the use of money substitute can improve welfare.