This paper models the relationship between product cycles, specialized capital, specialized skill, and non-homothetic preferences in the shift in production toward services over time. We explicitly model the decision of whether to produce services at home (using manufacturing goods as inputs) or in the market. Market production benefits from increasing returns in the use of specialized capital and skilled labor, but involves a utility cost due to join joint consumption. As the productivity grows, individual services follow a product cycle of moving from market services to home production as the costs of capital fall relative to the utility cost of joint consumption. Skill-intensive services follow this cycle more slowly and non-homothetic preferences increase demand for skill-intensive services over time, which drives a shift toward market services. The model predicts an increase in the share of services, the share of services produced by skilled labor, the level of skill, the return to skill, and the fraction of market services consumed by high income workers
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number
496.
Length: Date of creation: 03 Dec 2006 Date of revision: Handle: RePEc:red:sed006:496
Contact details of provider: Postal: Society for Economic Dynamics Anne Stubing CV Starr Center for Applied Economics 269 Mercer Street, Room 303 New York University New York, NY 10003 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/society.htm More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Christian Zimmermann).
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)