MARKET ECONOMIES WITH AN ENDOGENOUS SOCIAL DIVISION OF LABOR

Robert P. Gilles

International Economic Review, 2019, vol. 60, issue 2, 821-849

Abstract: I consider a general equilibrium model of a competitive market economy in which production is conducted through an endogenous social division of labor. I represent economic decision makers as “consumer–producers,” who consume as well as produce commodities. In this approach, the emergence of a nontrivial social division of labor is guided by Increasing Returns to Specialization (IRSpec) in production. Under IRSpec, I show existence of competitive equilibria, the two fundamental theorems of welfare economics, and characterize these equilibria. Markets equilibrate through the adjustment of the social division of labor; the production technologies completely determine the equilibrium prices.

Date: 2019
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