The Division of Labor, Investment, and Capital

Xiaokai Yang

Working Papers from Chicago - Graduate School of Business

Abstract: This paper uses a dynamic general equilibrium model based on corner solutions to formalize the classical theory of investment and capital which considers investment to be a vehicle for developing a high level of division of labor in roundabout productive activities. If it takes time for a specialist producer of tractors to learn the right method in producing commercially viable tractors, specialization in producing tractors is infeasible in the absence of investment in terms of consumption goods which are consumed by the specialist producer of tractor before he can sell tractors. If specialized learning by doing can speed up accumulation of professional knowledge so that roundabout productive machines becomes cheap, such investment for increasing the level of division of labor in roundabout productive activities will speed up economic growth. Due to the tradeoff between economies of specialized learning by doing and transaction costs, the model can be used to investigate the effects of a change in the transaction cost coefficient, which can be affected by policy, the legal system, and urbanization, on the evolution of division of labor, on real interest rates, and on saving rate.

Keywords: INVESTMENTS (search for similar items in EconPapers)
JEL-codes: D23 D50 D90 O12 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Chapter: THE DIVISION OF LABOR, INVESTMENT AND CAPITAL (2006)
Journal Article: The Division of Labor, Investment and Capital (1999)
Working Paper: The Division of Labor, Investment, and Capital (1999)
Working Paper: The Division of Labor, Investment, and Capital (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fth:chicbu:8

Access Statistics for this paper

More papers in Working Papers from Chicago - Graduate School of Business UNIVERSITY OF CHICAGO, H.G.B. ALEXANDER FOUNDATION GRADUATE SCHOOL OF BUSINESS, CHICAGO ILLINOIS 60637 U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().