More advanced technologies demand higher degrees of specialization - and longer chains of production connecting raw inputs to final outputs. Longer production chains are subject to a "weakest link" effect: they are more fragile and more prone to failure. Optimal chain length is determined by the trade-off between the gains to specialization and the higher failure rate associated with longer chain length. There is a kind of reverse "Keynesian multiplier" that magnifies the effect of real shocks. Consequently, more advanced economies may have lower utilization of resources and be more prone to crisis. (Copyright: Elsevier)
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Volume (Year): 15 (2012)
Issue (Month): 3 (July)
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