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Can Destructive Network Activities Push An Economy To A Lower Level Of Specialization? A Theoretical Illustration

Author

Listed:
  • MEI WEN

    (SHUFE, China;
    University of Sydney, Australia)

  • WENLI CHENG

    (Hunan University of Science and Technology, China;
    Monash University, Australia)

Abstract

In the existing literature of infra-marginal analysis, there are many models describing how infrastructure investment can promote division of labour, trade interdependency, and income growth. However, detrimental effects from destructive network activities have not been formally studied. Destructive network activities can slow down both production and transaction activities. This paper develops a general equilibrium model to illustrate how destructive network activities can push a developed market economy to a lower level of division of labour, thereby causing losses in both productivity and real per capita income.

Suggested Citation

  • Mei Wen & Wenli Cheng, 2011. "Can Destructive Network Activities Push An Economy To A Lower Level Of Specialization? A Theoretical Illustration," Division of Labor & Transaction Costs (DLTC), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 57-67.
    • Handle: RePEc:wsi:dltcxx:v:03:y:2011:i:02:n:s0219871111000378
    DOI: 10.1142/S0219871111000378
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    More about this item

    Keywords

    Network frictions; productivity; transaction efficiency;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D - Microeconomics
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F - International Economics
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L - Industrial Organization
    • O - Economic Development, Innovation, Technological Change, and Growth

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