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Infrastructure and Evolution in Division of Labor

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  • Mei Wen

Abstract

This paper studies the relationship between infrastructure expenditure and endogenous growth generated by spontaneous evolution of division of labor. It identifies the necessary condition for infrastructure expenditure to take place and its equilibrium time path. Dynamic equilibrium shows that the optimal infrastructure expenditure, the size of the market network, and the level of division of labor increase concurrently. While infrastructure can promote the evolution of division of labor through reducing the unit transaction cost, the total transaction cost each consumer‐producer incurs rises as the optimal share of the infrastructure expenditure increases with economic development.

Suggested Citation

  • Mei Wen, 1997. "Infrastructure and Evolution in Division of Labor," Review of Development Economics, Wiley Blackwell, vol. 1(2), pages 191-206, June.
    • Handle: RePEc:bla:rdevec:v:1:y:1997:i:2:p:191-206
    DOI: 10.1111/1467-9361.00013
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    Cited by:

    1. Mei Wen & Stephen P. King, 2006. "Push Or Pull? The Relationship Between Development, Trade And Primary Resource Endowment," World Scientific Book Chapters, in: Christis Tombazos & Xiaokai Yang (ed.), Inframarginal Contributions To Development Economics, chapter 20, pages 497-529, World Scientific Publishing Co. Pte. Ltd..
    2. Wen, Mei, 2004. "E-commerce, productivity, and fluctuation," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 187-206, October.
    3. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.

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