This page contains working papers and recently published work on the theory of economies with an endogenously forming social division of labour.
The Provision of Collective Goods through a Social Division of Labour
by Robert P. Gilles, Marialaura Pesce and Dimitrios Diamantaras
This paper develops a general equilibrium framework of a continuum economy in which (non-Samuelsonian) collective goods are provided by specialised professionals as part of an endogenously emerging social division of labour. This model merges the notion of valuation equilibrium in an economy with collective goods with the model of a market economy with an endogenously emerging social division of labour. This allows for the implementation of Adam Smith’s principle of increasing returns to specialisation into the foundations for the economy’s ability to deliver collective goods.
We introduce the appropriate generalised notion of valuation equilibrium in this setting and prove the first and second welfare theorems for this notion, enhancing the standard framework of an economy with (non-Samuelsonian) collective goods and multiple private goods. We conclude with an application of the theory we develop to the issue of green energy and pollution abatement, exploiting the flexibility and generality our framework offers.
Latest version: SDL-PG-2017
Market Economies with an Endogenous Social Division of Labour
by Robert P. Gilles
This paper considers a general equilibrium model of a competitive market economy with an endogenous social division of labour. We represent economic decision makers as “consumer-producers”, who consume as well as produce commodities. In this approach, the emergence of a non-trivial social division of labour is guided by the Smithian property of Increasing Returns to Specialisation and trade among productively fully specialised individuals. This paper focusses on the effects of the introduction of the property of Increasing Returns to Specialisation on the equilibria that emerge.
We show that a perfectly competitive price mechanism induces a dichotomy of production and consumption at the level of the individual consumer-producer. In this context, under Increasing Returns to Specialisation, we show existence of competitive equilibria, the two fundamental theorems of welfare economics and characterise these equilibria. Under certain broad conditions, markets are equilibrated through the adjustment of the social division of labour; therefore prices are objectively determined by the production technologies on the supply side of the economy only.
PDF file of this paper: SDL-equilibrium
Stability in a Network Economy: The Role of Institutions
by Robert P. Gilles, Emiliya A. Lazarova and Pieter H.M. Ruys
April 2015; Published: September 2015
We consider an economy in which agents are embedded in a network of potential value-generating relationships. Agents are assumed to be able to participate in three types of economic interactions: Autarkic self-provision; bilateral interaction; and multilateral collaboration.
We introduce two stability concepts and provide sufficient and necessary conditions on the network structure that guarantee existence, in cases of the absence of externalities, link-based externalities and crowding externalities. We show that institutional arrangements based on socioeconomic roles and leadership guarantee stability. In particular, the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions. We investigate strict social hierarchies, tiered leadership structures and global market places.
PDF file of this paper: RelEcon2015