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Smithian growth through creative organization

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Legros, Patrick, Newman, Andrew F. and Proto, Eugenio (2014) Smithian growth through creative organization. Review of Economics and Statistics, Volume 96 (Number 5). pp. 796-811. doi:10.1162/REST_a_00421

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Official URL: http://dx.doi.org/10.1162/REST_a_00421

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Abstract

We model technological progress as an external effect of organizational design, focusing 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 division 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 because of high wage shares. Technological progress therefore occurs with a moderate scarcity of entrepreneurs. Institutional improvements affect growth ambiguously.

Item Type: Journal Article
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Industrial revolution, Factories, Entrepreneurship , Technological innovations, Economic development
Journal or Publication Title: Review of Economics and Statistics
Publisher: MIT Press
ISSN: 0034-6535
Official Date: December 2014
Dates:
DateEvent
December 2014Published
29 October 2013Available
21 June 2013Accepted
23 February 2012Submitted
Date of first compliant deposit: 28 December 2015
Volume: Volume 96
Number: Number 5
Page Range: pp. 796-811
DOI: 10.1162/REST_a_00421
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
Funder: Communauté française de Belgique. Action de Recherche Concertée, Seventh Framework Programme (European Commission) (FP7)
Grant number: ARC00/05-252 (CFdB), SSH7- CT- 2008-217436 (FP7)

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