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Specialization, Information, and Growth: A Sequential Equilibrium Analysis

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  • Yew-Kwang Ng
  • Xiaokai Yang

Abstract

Pricing costs and information problems are introduced into a framework with consumer-producers, economies of specialization, and transaction costs to predict the endogenous and concurrent evolution in division of labor and in the information of organization acquired by society. The concurrent evolution generates endogenous growth based on the tradeoff between gains from information about the efficient pattern of division of labor, which can be acquired via experiments with various patterns of division of labor, and experimentation costs, which relate to the costs in discovering prices. The concept of Walras sequential equilibrium is developed to analyze the social learning process which is featured with uncertainties of the direction of the evolution as well as a certain trend of the evolution.

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Bibliographic Info

Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 7.

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Date of creation: Mar 1999
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Handle: RePEc:wop:cidhav:7

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Keywords: Coevolution of specialization and information; adaptive decision; bounded rationality; sequential equilibrium; economic development.;

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  1. Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
  2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  3. Aghion, P. & Bolton, P. & Harris, C. & Jullien, B., 1990. "Optimal Learning By Experimentation," DELTA Working Papers 90-10, DELTA (Ecole normale supérieure).
  4. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  5. Grossman, G.M. & Helpman, E., 1988. "Product Development And International Trade," Papers 132, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  7. Aghion, Philippe, et al, 1991. "Optimal Learning by Experimentation," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 621-54, July.
  8. Yang, Xiaokai, 1990. "Development, structural changes and urbanization," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 199-222, November.
  9. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  10. 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.
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Cited by:
  1. Davis, Lewis S., 2006. "Growing apart: The division of labor and the breakdown of informal institutions," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 75-91, March.
  2. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.
  3. Phillips, Kerk L., 2010. "A Dynamic Model of Specialization and Market Development as Engines of Economic Growth," MPRA Paper 23500, University Library of Munich, Germany.

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