Smithian Growth through Creative Organization

Patrick Legros, Andrew F. Newman and Eugenio Proto

No 2013-014, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: We model technological progress as an external effect of organizational design, fo- cusing on how factories, based on labor division, could spawn the industrial revolution. Dividing labor, as Adam Smith argued, facilitates invention by observers of production processes. However, entrepreneurs cannot internalize this benefit and choose labor di- vision to facilitate monitoring. Equilibrium with few entrepreneurs features low wage shares, high specialization, but a limited market for innovations. Conversely, with many entrepreneurs there is a large market for innovation, but little specialization be- cause of high wage shares. Technological progress therefore occurs with a moderate scarcity of entrepreneurs. Institutional improvements affect growth ambiguously.

Keywords: factory system; industrial revolution; technological change; contracts (search for similar items in EconPapers)
Pages: 32 Creation date: 2013-14
New Economics Papers: this item is included in nep-cse, nep-ent, nep-ino, nep-knm and nep-sbm
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Related works:
Journal Article: Smithian Growth through Creative Organization (2014)
Working Paper: Smithian Growth Through Creative Organization (2012)
Working Paper: Smithian Growth Through Creative Organization (2012)
Working Paper: Smithian Growth Through Creative Organization (2012)
Working Paper: Smithian Growth through Creative Organization (2007)
Working Paper: Smithian Growth through Creative Organization (2006)
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