TITLE:
Transaction Cost, Specialization and Division of Labor —A General Equilibrium Analysis of Entrepreneurship under Globalization
AUTHORS:
Ke Li
KEYWORDS:
Entrepreneurship; Division of Labor; Specialization; Transaction Cost; Globalization; Fixed Learning Cost
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.1,
February
12,
2014
ABSTRACT:
This paper develops a
Walrasian general equilibrium model based on transaction cost and
specialization to investigate the evolution and role of entrepreneurship in a
competitive market under globalization. The implication of our model is
straightforward that if the entrepreneurship in a competitive market under
globalization is efficient, it will ensure the network and effects of division
of labor can be fully exploited when the gains from the division of labor
outweigh the costs of exchange between individuals of different specialization
patterns with the different fixed learning costs. Hence, the entrepreneurship
service in a competitive market under globalization can promote aggregate
productivity by enlarging the scope for trading off network effects of the
division of labor on aggregate productivity against transaction costs. To
business practitioners, this model suggests that the entrepreneurship service
is a key element of business viability during which a major transition took
place in human activity. Besides, the improvement of the level of globalization
and the general transaction efficiency coefficient will increase the level of
division of labor and the per capita real income level of participants.