Xiaokai Yang

Specialization and Division of Labour: A Survey

The purpose of this chapter is to survey the literature on specialization and the division of labour in society. In the introductory section the classical literature on specialization is briefly reviewed. The neoclassical literature on specialization and new trade and growth theory based on marginal analysis will be reviewed in Section 1.2. The formal decision models that apply inframarginal analysis to endogenize individuals’ levels of specialization and the equilibrium models that apply marginal analysis to endogenize individuals’ levels of specialization will be surveyed in Section 1.3. New classical equilibrium models of specialization based on corner solutions and inframarginal analysis will be surveyed in Section 1.4.

Theory of the firm and structure of residual rights

AbstractThe following sections are included:IntroductionA Model with Intermediate GoodsConfiguration and Corner Solution versus Market Structure and Corner EquilibriumStructure of Residual Rights, Economies of Specialization, Economies of Division of Labor, and Economies of the FirmImplications and ConclusionsAppendix: Proof of Proposition 1References

Increasing Returns and Economic Analysis

Acknowledgements - Preface - Introduction - PART 1: SPECIALIZATION, ORGANIZATION AND GROWTH: NEW CLASSICAL ECONOMICS - Specialization and Division of Labour: a Survey X.Yang & S.Ng - Comments J.M.Buchanan - Comments J.Borland - Specialisation and the Emergence and the Value of Money W.Cheng - Productivity, Investment in Infrastructure and Population Size: Formalizing the Theory of Ester Boserup C.Y.C.Chu & Y-C.Tsai - The Inframarginal Analysis of Demand and Supply and the Relationship between a Minimum Level of Consumption and the Division of Labour M.Lio - Economies of Specialization and Trade S.Ng - Centralized Hierarchy within a Firm and Decentralized Hierarchy in the Market H.Shi & X.Yang - An Analytical Framework of Consumer-producers, Economies of Specialization and Transaction Costs M.Wen - An Extended Ethier Model with the Tradeoff between Economies of Scale and Transaction Costs K-y.Wong & X.Yang - Policy Analysis in a Dynamic Model with Endogenous Specialization J.Zhang PART 2: ECONOMIES OF SCALE AND MONOPOLISTIC COMPETITION - Increasing Returns, Constant Returns and Micro-Macro Economics R.Marris - Non-neutrality of Money under Non-perfect Competition: Why do Economists fail to see the Possibility? Y-K.Ng - Comments R.Marris - A Dynamic Model of Monopolistic Competition with Trade Externalities and Fiscal Policy K.N.Cheung - Comments C-S.Hwang - Industrialisation Policy and the Big Push J.Gans - Comments P.A.Trostel - Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy K.A-Silva & M.Horridge - Comments P.B.Dixon - Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change P.F.Peretto - Pursuit of Relative Conspicuous Consumption in Monopolistic Competition J.Wang & Y-K.Ng - Economic Fluctuations and Non-neutrality of Money based upon Imperfect Competition X.Yin - PART 3: INFORMATION, TRADE, AND RESOURCES - Innovation and Increasing Returns to Scale K.J.Arrow - Variable Returns to Scale and Factor Price Equalization M.Kemp, M.Okawa & M.Tawada - The Stolper-Samuelson Theorem in Models with Economies of Scale P.J.Lloyd & A.G.Schweinberger - Comments P.M.Sgro - Variable Returns to Scale, Resources and Population J.Pitchford - Index

Specialization, Information, and Growth: A Sequential Equilibrium Analysis

Pricing costs and information problems are introduced into a framework with consumer-producers, economies of specialization, and transaction costs to predict the endogenous and concurrent evolution in division of labor and in the information of organization acquired by society. The concurrent evolution generates endogenous growth based on the tradeoff between gains from information about the efficient pattern of division of labor, which can be acquired via experiments with various patterns of division of labor, and experimentation costs, which relate to the costs in discovering prices. The concept of Walras sequential equilibrium is developed to analyze the social learning process which is featured with uncertainties of the direction of the evolution as well as a certain trend of the evolution.

Toward a Theory of Impersonal Networking Decisions and Endogenous Structure of Division of Labor

In the paper, an analytical framework with both increasing returns and transaction costs is developed to investigate the general equilibrium with endogenous specialization and division of labor. In this framework, the impersonal network of the division of labor emerges from the interactions among self-interested Walrasian decisions of ex ante identical individuals guided by the abstract price signals. Having proved the existence theorem of equilibrium for a general class of models, we can then show that the emergent network structure of the division of labor as such is efficient. With the analytical framework, the spirit of classical mainstream economics regarding the decentralized coordination of the division of labor can be resurrected in a modern body of inframarginal analysis (total cost-benefit analysis between corner solutions in addition to marginal analysis of each corner solution).

Pattern of Trade and Economic Development in a Model of Monopolistic Competition

The paper introduces differences in production and transaction conditions between countries into a model of monopolistic competition. It applies inframarginal analysis to show that, as transaction conditions are improved, the general equilibrium may jump discontinuously across different patterns of trade and economic development. A country may export a good in which it has exogenous comparative disadvantage if its endogenous comparative advantage dominates this disadvantage. Countries will choose a trade and development pattern to utilize their net exogenous and endogenous comparative advantages in production as well as in transactions.

An Inframarginal Approach to Trade Theory

Inframarginal analysis represents a methodology that extends marginal analysis, using non-classical mathematical programming, in efforts to investigate corner solutions and indivisibilities. As such this approach has been used to reintroduce classical insights regarding the division of labor and economic organization to the mainstream of economic inquiry. One of the most prolific and useful relevant applications of inframarginal analysis concerns the area of international trade theory. The ensuing field of study has attracted considerable — and rapidly expanding — interest in recent years. Yet, little has been done by way of organizing the accumulated knowledge in a single volume. This book fills that gap by collecting key articles that mark distinct stages in the evolution of research in the area of inframarginal applications to trade theory. In this context the volume represents an excellent introduction of this novel and exciting field of study to the new researcher, and an invaluable source of reference to those seasoned in inframarginal applications to trade theory.

Agglomeration Economies, Division of Labour and the Urban Land‐rent Escalation: A General Equilibrium Analysis of Urbanisation

A general equilibrium model with increasing return to labour specialisation and economies of transaction agglomeration is developed to address the residential land-rent escalation associated with the urbanisation process, which is in turn endogenised as a result of the evolution of the division of labour. The interplay among the geographical pattern of transactions, trading efficiency and the network size of the division of labour plays a crucial role in our story of urbanisation. We show that: as transaction conditions are improved, the equilibrium level of division of labour and individuals specialisation levels increase; the urban land-rent increases absolutely as well as relative to that in the rural area, the relative per capita lot size of residence in the urban and rural areas decreases; the diversity of occupations in the urban area and the population share of urban residents increase; and the productivity of all goods and per capita real income increase. Copyright 2002 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Endogenous Specialisation and Endogenous Principal-agent Relationship

The paper develops a general equilibrium model with endogenous principal-agent relationship within a framework of consumer-producer, economies of specialisation, and transaction costs. It is shown that if transaction efficiency is low, then autarky is chosen as the general equilibrium where no market and principal-agent relationship exists. As transaction efficiency is improved, the equilibrium level of division of labour increases, comparative advantage between identical individuals emerges from the division of labour, and the number of principal-agent relationships increases. The following features of the model distinguish it from other principal-agent models in the literature. The principal-agent relationships are not only endogenous, but also reciprocal between different specialists. In a general equilibrium environment, choice between pure pricing and contingent pricing is endogenised. In the paper, the implications of endogenous transaction costs caused by moral hazard for the equilibrium extent of the market and related degrees of market integration, production concentration, trade dependence, diversity of economic structure, and productivity are explored. The model predicts two interesting phenomena: A man might work harder for the market with moral hazard than working for himself in the absence of moral hazard; a market with moral hazard might be Pareto superior to autarky with no moral hazard.

Incomplete Contingent Labor Contract, Asymmetric Residual Rights and Authority, and the Theory of the Firm

In the paper the trade-offs among endogenous transaction costs caused by two-sided moral hazard, exogenous monitoring cost, and economies of specialization are specified in a Grossman, Hart and Moore (GHM) model to absorb Maskin and Tirole’s recent critique and Holmstrom and Milgrom’s criticism of the model of incomplete contract. The extended GHM model allowing incomplete contingent labor contract as well complete contingent contract of goods trade is used to explore the implications of structure of ownership and residual rights for the equilibrium network size of division of labor and productivity.