Identification of equilibrium structures of endogenous specialisation: a unified approach exemplified
journal contributionposted on 08.06.2017 by Sun, Guang-Zhen
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A new method for identifying equilibria and conducting comparative statics of structures of the division of labour is proposed and illustrated by some models that are most typical of the literature on endogenous specialisation. The method starts with analysing individuals' decisions on specialisation under given price signals, and then solves for the equilibria and comparative statics in one step, resulting in a complete characterisation of subspaces of parameters in which different structures of specialisation occur in equilibrium. This approach proves highly powerful, particularly in dealing with models with substitutions between markets (for products and those for labour) andlor ex ante heterogeneous agents.