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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
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 | ||||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions |
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| 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: |
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| 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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