Market Economies With an Endogenous Social Division of Labor

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.

The Core of economies with collective goods and a social division of labour

“…We show below that these results can naturally be extended to the setting of an economy with an endogenous social division of labour and collective good provision. These insights build on the results established by Gilles (2018a), which, in turn, extended the theorems from Schmeidler (1972) and Vind (1972) to the realm of continuum economies with an endogenous social division of labor.…”

“…blocking coalitions by devising conditions under which the theorems of Schmeidler (1972) and Vind (1972) hold in the framework developed here. Gilles (2018a) showed that both of these results extend unconditionally to continuum economies with an endogenous social division of labour. Here, in the context of collective good provision through a social division of labor, we show that the extension of Schmeidler's result that any non-σ -Core allocation can be blocked by an arbitrarily small coalition, applies in our framework.…”

“…One particular concern is about the size of blocking coalitions. This has been pursued in contributions by Schmeidler (1972); Vind (1972); Grodal (1972); Gilles and Ruys (1998); Hervés-Beloso, Moreno-García, Núñez, and Pascoa (2000); Hervés-Beloso, Moreno-García, and Yannelis (2005); Greenberg, Weber, and Yamazaki (2007); Evren and Hüsseinov (2008) and Gilles (2018a) for economies with private commodities only. We show below that these results can naturally be extended to the setting of an economy with an endogenous social division of labour and collective good provision.…”

“…The second question concerns the nature or composition of blocking coalitions. Gilles (2018a) showed that in a continuum economy with an endogenous social division of labor and private goods only, non-Core allocations can be blocked by coalitions with internal divisions of labor based on full specialisation of its constituting members. Indeed, in the context of our notion of an economy, the social division of labour is perfectly fluid in a continuum of consumer-producers.…”

“…Blocking through social divisions of labor. Recently, Gilles (2018a) introduced the idea that in economies of consumer-producers, coalitions can use internal social divisions of labor in Edgeworthian re-trade. Hence, blocking coalitions can be assumed to be organised internally through a fully developed social division of labor, founded on the principle that almost every member of the coalition is fully specialised in the production of a single commodity.…”