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MARKET ECONOMIES WITH AN ENDOGENOUS SOCIAL DIVISION OF LABOR
Author(s) -
Gilles Robert P.
Publication year - 2019
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12369
Subject(s) - division of labour , economics , production (economics) , division (mathematics) , microeconomics , welfare , general equilibrium theory , competitive equilibrium , social welfare , endogenous growth theory , labour economics , market economy , human capital , arithmetic , mathematics , political science , law
I consider a general equilibrium model of a competitive market economy in which production is conducted through an endogenous social division of labor. I represent economic decision makers as “consumer–producers,” who consume as well as produce commodities. In this approach, the emergence of a nontrivial social division of labor is guided by Increasing Returns to Specialization (IRSpec) in production. Under IRSpec, I show existence of competitive equilibria, the two fundamental theorems of welfare economics, and characterize these equilibria. Markets equilibrate through the adjustment of the social division of labor; the production technologies completely determine the equilibrium prices.