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The Production Life Cycle
Author(s) -
Li Ben G.,
Liu Yibei
Publication year - 2018
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12255
Subject(s) - stylized fact , economics , offshoring , fragmentation (computing) , production (economics) , welfare , microeconomics , wage , productivity , labour economics , outsourcing , macroeconomics , computer science , business , market economy , marketing , operating system
Tasks in production have different dynamics from individuals products. We build a general equilibrium model where three forces (i.e., offshoring, learning, and wage) interact to determine how production fragmentation evolves over time. We show that the production process follows a life cycle: its fragmentation emerges, deepens, and converges. Our model is stylized and versatile, and it can be used to tractably characterize the loci of global output, productivity, welfare, and value‐added distribution as production fragmentation progresses.