No mere tautology: the division of labour is limited by the division of labour

Andrew Smyth and Bart Wilson

Oxford Economic Papers, 2021, vol. 73, issue 1, 371-398

Abstract: We explore the intersection of growth theory and the theory of the firm with an experiment. Economic growth is possible in our experiment when agents specialize to exploit increasing returns. We find that low opportunity costs are sufficient for Marshallian internal economies, but that Marshallian external economies are slow to emerge in four probing treatment conditions. Transaction costs do not hamper external economies as we anticipated prior to collecting data. When external economies falter, it is because new ideas of more extensive specialization fail to emerge. Ideas make further divisions of the division of labour—and thus economic growth—possible. Conversely, a lack of ideas make further divisions of labour and economic growth impossible. Our data reveal how the likelihood of new ideas is inseparably tied to the existing extent of specialization.

JEL-codes: C92 D23 L20 O40 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Working Paper: No Mere Tautology: The Division of Labor is Limited by the Division of Labor (2017)
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