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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.

Suggested Citation

  • Lewis S. Davis, 1998. "The Division of Labor, Coordination Costs and the Growth of Government," Departmental Working Papers 199803, Department of Economics, SUNY-Oswego, revised 01 Dec 1998.
    • Handle: RePEc:nyo:oswaaa:199803
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    More about this item

    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;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • H4 - Public Economics - - Publicly Provided Goods

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