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The Division of Labor, Coordination Costs and the Growth of Government

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Abstract

The paper develops a dynamic, general equilibrium model of specialization-driven growth in which the private cost of coordinating among specialists is a function of public expenditure on physical and institutional infrastructure. Growth is characterized by endogenous increases in labor specialization, the capital-labor ratio, coordination costs, market size, and the interdependence of economic agents. In addition, model provides an explanation for a frequently ignored stylized fact of economic growth, the secular rise of government's share of output, in terms of the economic role of the government.

Suggested Citation

  • Lewis S. Davis, 1998. "The Division of Labor, Coordination Costs and the Growth of Government," Departmental Working Papers 199803, Department of Economics, SUNY-Oswego, revised 01 Dec 1998.
  • Handle: RePEc:nyo:oswaaa:199803
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    File URL: http://economic.oswego.edu/papers/div_lab_gov.pdf
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
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    4. Xiaokai Yang, 2006. "Development, Structural Changes And Urbanization," World Scientific Book Chapters,in: Inframarginal Contributions To Development Economics, chapter 7, pages 137-166 World Scientific Publishing Co. Pte. Ltd..
    5. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 299-322 National Bureau of Economic Research, Inc.
    6. Karl Shell, 2010. "Toward A Theory of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1407, David K. Levine.
    7. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
    8. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
    9. Barzel, Yoram & Yu, Ben T, 1984. "The Effect of the Utilization Rate on the Division of Labor," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 18-27, January.
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    More about this item

    Keywords

    development; endogenous growth; labor specialization; dynamic model; institutions; division of labor; growth; transactions costs; coordination; coordination costs; contract enforcement; organization; neoinstitutionalism; traditional economy; interpersonal exchange; government; transaction sector; public investment; public capital;

    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
    • H4 - Public Economics - - Publicly Provided Goods

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