Uncertainty, Insurance, and Division of Labor

Monchi Lio

Review of Development Economics, 1998, vol. 2, issue 1, 76-86

Abstract: This paper develops an equilibrium model to investigate the relationships between transaction uncertainties, risk aversion, insurance, specialization, per capita real income, and productivity progress. It is shown that transaction uncertainties can restrict the division of labor; the level of division of labor decreases with the degree of risk aversion; insurance will promote the equilibrium level of division of labor, per capita real income, and productivity.

Date: 1998
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