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A Benefit from the Division of Labor that Adam Smith Missed

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  • Wenli Cheng

Abstract

This paper argues that there is an important benefit from the division of labor that Adam Smith failed to mention, that is, the division of labor shortens the time required for capital formation and makes continuous roundabout production possible. The paper presents a simple general equilibrium model to demonstrate this benefit, which is referred to as the “value of time” benefit of the division of labor.

Suggested Citation

  • Wenli Cheng, 2010. "A Benefit from the Division of Labor that Adam Smith Missed," Monash Economics Working Papers 16-10, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2010-16
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2010/1610divisioncheng.pdf
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    More about this item

    Keywords

    the division of labor; time structure of production; capital formation; transaction costs;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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