The Production Life Cycle

Ben Li and Yibei Liu

Scandinavian Journal of Economics, 2018, vol. 120, issue 4, 1139-1170

Abstract: Tasks in production have different dynamics from individuals products. We build a general equilibrium model where three forces (i.e., offshoring, learning, and wage) interact to determine how production fragmentation evolves over time. We show that the production process follows a life cycle: its fragmentation emerges, deepens, and converges. Our model is stylized and versatile, and it can be used to tractably characterize the loci of global output, productivity, welfare, and value‐added distribution as production fragmentation progresses.

Date: 2018
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