Division of Labor, Money, and Economic Progress

Wenli Cheng

Review of Development Economics, 1999, vol. 3, issue 3, 354-368

Abstract: This paper develops a general equilibrium model to formalize Adam Smith’s insight on the relationship between the division of labor, the emergence of money, and economic progress. The model demonstrates that the division of labor is the driving force behind the emergence of money, and the use of money in turn stimulates further division of labor. It also shows that the use of money substitute can improve welfare.

Date: 1999
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