The division of labor and the growth of government

✍ Scribed by Lewis S. Davis

• Publisher: Elsevier Science
• Year: 2003
• Tongue: English
• Weight: 231 KB
• Volume: 27
• Category: Article
• ISSN: 0165-1889
• DOI: 10.1016/s0165-1889(02)00022-2

✦ Synopsis

This paper develops a dynamic, general equilibrium model of specialization-driven growth in which private coordination costs are decreasing in public expenditure on physical and institutional infrastructure. The model provides an explicitly economic explanation of the secular rise of government. In addition, endogenous specialization decisions imply the existence of four development stages, characterized by distinct outcomes regarding the division of labor, the role of government and the return to capital. Growth is characterized by capital accumulation, market integration, the division of labor and the growth of government. The e ectiveness of government plays a central role in determining whether an economy converges to a high or low level equilibrium.