Phillips, Kerk L. (2010): A Dynamic Model of Specialization and Market Development as Engines of Economic Growth.
Download (223kB) | Preview
This paper constructs a model of growth based on Adam Smith's notions of specialization and extent of the market. We seek to explain the following stylized facts. 1) The share of household production in total output has fallen over time as the economy has grown. 2) Services as a percent of GDP have risen at the same time. In this paper growth depends on specialization of labor according to comparative advantage in production and learning-by-doing in transactions services. It is a model of sustained, but not infinite, growth. Indeed, the main point of the paper is that it is possible to build growth models that match the historic experience without relying in unbounded growth. The model can replicate the above stylized facts for reasonable annual GDP growth rates. Simulations show that inequality over the growth episode is characterized by an inverted U-shaped curve.
|Item Type:||MPRA Paper|
|Original Title:||A Dynamic Model of Specialization and Market Development as Engines of Economic Growth|
|Keywords:||growth; extent of the market; market development; specvialization|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D13 - Household Production and Intrahousehold Allocation
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
|Depositing User:||Kerk Phillips|
|Date Deposited:||26. Jun 2010 17:56|
|Last Modified:||01. Mar 2013 18:57|
Ades, Alberto F. and Edward L. Glaeser. (1999) “Evidence on Growth, Increasing Returns, and the Extent of the Market,” The Quarterly Journal of Economics, pp. 1025-1045.
Aghion, P. and P. Howitt. (1992), "A Model of Growth through Creative Destruction," Econometrica, vol. 60, no. 2 pp. 323-51.
Arrow, Kenneth J. (1962) "The Economic Implications of Learning by Doing." Review of Economic Studies vol. 29 pp. 155-173.
Bartolini, Stefano and Luigi Bonatti. (2008) “Endogenous Growth, Decline in Social Capital and Expansion of Market Activities,” Journal of Economic Behavior & Organization, vol. 67, pp. 917–926.
Devereux, John & Luis Locay. (1992) "Specialization, Household Production. and the Measurement of Economic Growth." American Economic Review vol. 82 no. 2 pp. 399-403.
Fishman, Arthur & Avi Simhon. (2002) “The Division of Labor, Inequality and Growth,” Journal of Economic Growth, vol. 7, pp. 117-136.
Grossman, G.M. and E. Helpman. (1991), "Quality Ladders in the Theory of Growth," Review of Economic Studies, vol. 63, pp. 43-61.
Kim, Sunwoong. (1989) “Labor Specialization and the Extent of the Market,” Journal of Politiral Economy, vol. 97, no. 31, pp. 692-705.
Locay, Luis. (1990) "Economic Development and the Division of Production between Households and Markets." Journal of Political Economy vol. 98 no. 5 pp. 965-982.
Lucas, Robert E., Jr. (1988) "On the Mechanics of Economic Development." Journal of Monetary Economics vol. 22 no. 1 pp. 3-42.
Ng, Yew-Kwang & Xiaokai Yang. (1997) “Specialization, Information, and Growth: A Sequential Equilibrium Analysis,” Review of Development Economics, vol. 1, no. 3, pp. 257-274.
Romer, Paul M. (1986) "Increasing Returns and Long-Run Growth." Journal of Political Economy vol. 94 no. 5 pp. 1002-1037.
Solow, Robert M. (1957) "Technical Change and the Aggregate Production Function." Review of Economics and Statistics vol. 39 no. 3 pp. 312-320.
Segerstrom, P.S., T.C.A. Anant, & E. Dinopoulos (1990), “A Schumpeterian Model of the Product Life Cycle,” American Economic Review, vol. 80, pp.1077-1091.
Summers, Robert & Alan Heston. (1991) "The Penn World Table (Mark 5): An Expanded Set of International Comparisons: 1950-1988." Quarterly Journal of Economics vol. 106 no. 425 pp. 327-368.
Swanson, Charles E. (1999) “The Division of Labor and the Extent of the Market.” Economics Letters vol. 62 pp. 135-138.
Yang, Xiakai, & Borland Jeff. (1991) "A Microeconomic Mechanism for Economic Growth." Journal of Political Economy vol. 99 no. 3 pp. 460-482.
Young, Alwyn. (1993) "Invention and Bounded Learning by Doing." Journal of Political Economy vol. 101 no. 3 pp. 443-473.
Available Versions of this Item
- A Dynamic Model of Specialization and Market Development as Engines of Economic Growth. (deposited 26. Jun 2010 17:56) [Currently Displayed]