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The Organization of Production and Economic Development

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Abstract

A formalization of the Coase-Williamson-Cheung theory of the firm is used to examine the trade-off between the firm and the market as institutions for organizing production in a dynamic, general equilibrium model with increasing returns to labor specialization. The model considers the interaction of internal and external transaction costs and the gains to labor specialization in determining important aspects of the organization of production including the degree of labor specialization, the size and specialization of firms and the pattern of interfirm trade. Endogenous growth is driven by capital accumulation and the division of labor. The evolution of economic organization is characterized by increases in labor specialization, interfirm trade, firm specialization (vertical disintegration) and firm employment.

Suggested Citation

  • Lewis S. Davis, 1998. "The Organization of Production and Economic Development," Departmental Working Papers 199802, Department of Economics, SUNY-Oswego, revised 01 Dec 1998.
    • Handle: RePEc:nyo:oswaaa:199802
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    File URL: http://economic.oswego.edu/papers/div_lab_firm.pdf
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    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

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