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The Organization of Production and Economic Development

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    Abstract

    A formalization of the Coase-Williamson-Cheung theory of the firm is used to examine the trade-off between the firm and the market as institutions for organizing production in a dynamic, general equilibrium model with increasing returns to labor specialization. The model considers the interaction of internal and external transaction costs and the gains to labor specialization in determining important aspects of the organization of production including the degree of labor specialization, the size and specialization of firms and the pattern of interfirm trade. Endogenous growth is driven by capital accumulation and the division of labor. The evolution of economic organization is characterized by increases in labor specialization, interfirm trade, firm specialization (vertical disintegration) and firm employment.

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    File URL: http://economic.oswego.edu/papers/div_lab_firm.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, SUNY-Oswego in its series Departmental Working Papers with number 199802.

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    Length: 37 pages
    Date of creation: 01 Dec 1998
    Date of revision: 01 Dec 1998
    Handle: RePEc:nyo:oswaaa:199802

    Contact details of provider:
    Postal: Department of Economics, SUNY-Oswego, Oswego, NY 13126, U.S.
    Phone: 315-312-2175
    Fax: 315-312-5444
    Email:
    Web page: http://www.oswego.edu/~economic/
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    Related research

    Keywords: development; endogenous growth; labor specialization; dynamic model; institutions; division of labor; growth; transactions costs; coordination; coordination costs; contract enforcement; organization; neoinstitutionalism; traditional economy; interpersonal exchange; theory of the firm; interpersonal exchange;

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    1. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185.
    2. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June.
    3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    4. Cheung, Steven N S, 1983. "The Contractual Nature of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(1), pages 1-21, April.
    5. Gary S. Becker & Kevin M. Murphy & Robert Tamura, . "Human Capital, Fertility, and Economic Growth," University of Chicago - Population Research Center 90-5a, Chicago - Population Research Center.
    6. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
    7. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 299-322 National Bureau of Economic Research, Inc.
    8. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
    9. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
    10. Sergio T. Rebelo, 1992. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
    11. Krugman, Paul, 1994. "Complex Landscapes in Economic Geography," American Economic Review, American Economic Association, vol. 84(2), pages 412-16, May.
    12. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June.
    13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    14. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
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