Jack of All Trades or a Master of One? Specialization, Trade, and Money

20 Pages Posted: 20 Oct 2003

See all articles by Gabriele Camera

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Robert R. Reed III

University of Kentucky - Gatton College of Business and Economics

Christopher J. Waller

Federal Reserve Banks - Federal Reserve Bank of St. Louis; University of Notre Dame - Department of Economics

Abstract

We consider a model of decentralized exchange where individuals choose the set of goods they produce. Specialization involves producing a smaller set of goods and doing it more proficiently. In doing so, agents reduce production costs, but also reduce the ease of trading their output. We derive the equilibrium degree of specialization and examine how it is affected by underlying fundamentals. Due to the existence of a hold-up problem, individuals specialize too little relative to the social optimum. Introducing money leads to more specialization relative to barter and increases welfare.

Suggested Citation

Camera, Gabriele and Reed, Robert and Waller, Christopher J., Jack of All Trades or a Master of One? Specialization, Trade, and Money. International Economic Review, Vol. 44, pp. 1275-1294, November 2003. Available at SSRN: https://ssrn.com/abstract=452783

Gabriele Camera (Contact Author)

Chapman University - Economic Science Institute ( email )

Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Robert Reed

University of Kentucky - Gatton College of Business and Economics ( email )

Department of Economics
Lexington, KY 40506
United States

Christopher J. Waller

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

University of Notre Dame - Department of Economics ( email )

434 Flanner Hall
Notre Dame, IN 46556
United States
574-631-4963 (Phone)
574-631-9238 (Fax)

HOME PAGE: http://www.nd.edu/~cwaller/

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