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Production Chains

  • David K Levine

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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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 659843000000000001.

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Date of creation: 06 Sep 2010
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Handle: RePEc:cla:levarc:659843000000000001
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