Technical Change and the Dynamics of The Division of Labor

The diversity of the labor factor in France evolves with some clear trends. This paper studies the implication for growth theory of the dynamics of the division of labor. Two causalities are introduced into a growth model with an endogenous evolution of the diversity of both factor, capital and labor. The first one is that there is a substitution effect at the firm level between the diversity of intermediate goods and the diversity of tasks decided by the firms. Second, the division of labor, and hence the simplification of tasks, facilitates innovation as Adam Smith already noted. The model yields two results. First, the division of labor increases in the long run if the endogenous speed of technical change is not too high. More generally, the division of labor tends to decrease when the technical change accelerates. These results are consistent with French data. Second, the model yields as a by product a growth model without scale effects : The aggregate returns on technical change are consistent with the data when the effect of division of labor on innovation is introduced.