The Social Division of Labour

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

April 2017


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

CSEF working paper #369

Market Economies with an Endogenous Social Division of Labour

by Robert P. Gilles

September 2016; Revised August 2017


This paper considers a general equilibrium model of a competitive market economy in which production is conducted through 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 Increasing Returns to Specialisation in production.

This model is an advanced mathematical theory of the Smithian logic of trade in an economy that is founded on a social division of labour. The main results confirm many of the main insights presented by Adam Smith in his 1776 “Wealth of Nations” book.

In particular, this paper investigates the properties of equilibria under Increasing Returns to Specialisation. 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, we show existence of competitive equilibria, the two fundamental theorems of welfare economics, and characterise these equilibria. Under certain 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. This confirms Smith’s vision of the labour theory of value.

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

Updated: 2017-09-01