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The Division of Labor, Coordination Costs and the Growth of Government

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    Abstract

    The paper develops a dynamic, general equilibrium model of specialization-driven growth in which the private cost of coordinating among specialists is a function of public expenditure on physical and institutional infrastructure. Growth is characterized by endogenous increases in labor specialization, the capital-labor ratio, coordination costs, market size, and the interdependence of economic agents. In addition, model provides an explanation for a frequently ignored stylized fact of economic growth, the secular rise of government's share of output, in terms of the economic role of the government.

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

    Paper provided by Department of Economics, SUNY-Oswego in its series Departmental Working Papers with number 199803.

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    Length: 45 pages
    Date of creation: 01 Dec 1998
    Date of revision: 01 Dec 1998
    Handle: RePEc:nyo:oswaaa:199803

    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; government; transaction sector; public investment; public capital;

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    1. Yang, X., 1988. "Development, Structural Changes, And Urbanization," Papers 575, Yale - Economic Growth Center.
    2. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
    3. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
    4. Becker, G.S. & Murphy, K.M., 1991. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - Economics Research Center 92-5, Chicago - Economics Research Center.
    5. Barzel, Yoram & Yu, Ben T, 1984. "The Effect of the Utilization Rate on the Division of Labor," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 18-27, January.
    6. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
    7. Becker, Gary S & Murphy, Kevin M & Tamura, Robert, 1990. "Human Capital, Fertility, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S12-37, October.
    8. Sala-i-Martin, Xavier X, 1996. "The Classical Approach to Convergence Analysis," Economic Journal, Royal Economic Society, vol. 106(437), pages 1019-36, July.
    9. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
    10. 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.
    11. 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.
    12. 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.
    13. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
    14. Danny Quah, 1996. "Twin peaks : growth and convergence in models of distribution dynamics," LSE Research Online Documents on Economics 2278, London School of Economics and Political Science, LSE Library.
    15. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
    16. Karl Shell, 2010. "Toward A Theory of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1407, David K. Levine.
    17. 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.
    18. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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