Grasping Reality on TypePad, by Brad DeLong

But how often is production really constant returns to scale? And how often are spillovers truly absent? And where and when are markets thick enough to actually be in any form of “competitive equilibrium”?

Four Things Going on…:

1. Path Dependence
2. Lock-In
3. Thick Markets
4. Division of Labor

Five Orienting Questions:

1. 1. 3
2. 5.

Division of Labor: Sukkoo Kim: Division of Labor and the Rise of Cities: Evidence from US Industrialization 1850-1880

Industrial revolution in the USA first took hold in rural New England as factories arose and grew in a handful of industries such as textiles and shoes. However, as factory scale economies rose and factory production techniques were adopted by an ever-growing number of industries, industrialization became concentrated in cities throughout the Northeastern region which came to be known as the manufacturing belt. While it is extremely difficult to rule out other types of agglomeration economies such as spillovers, this paper suggests that these geographic developments associated with industrial revolution in the USA are most consistent with explanations based on division of labor, job search, and matching costs.

Because division of labor and labor-matching costs were relatively limited in early industrialization, early factories who located near rural townships in New England did not face high costs of recruiting labor. However, in the second phase of industrialization, as scale economies rose and as factory organization of production spread to hundreds of industries, division of labor and matching costs rose, and firms and workers became concentrated in cities. Evidence suggests that cities with higher population levels fostered greater industrial diversity.

Whereas workers of early factories in rural New England were composed of native women and children, the industrial workforce of the second industrial revolution was composed of immigrant workers. Over the century of the industrial revolution, immigrants and ‘birds of passage’ came to the USA in extraordinary numbers from varying European nations and became the dominant industrial labor force. Because the extent of division of labor of the native labor force was likely to have been limited during this period, immigrants from numerous different nations with varying skills and physical attributes are likely to have significantly increased the extent of division of labor available in society…

• Industrial revolution in the USA first took hold in rural New England
  • Factories arose
  • Factories grew in a handful of industries such as textiles and shoes
  • Industrialization became concentrated in the Northeastern regional manufacturing belt. These geographic developments associated with industrial revolution in the USA are most consistent with explanations based on division of labor, job search, and matching costs.
  • It is extremely difficult to rule out other types of agglomeration economies
  • Early factories who located near rural townships in New England did not face high costs of recruiting labor.
  • In the second phase of industrialization
    • Scale economies rose
    • Factory organization of production spread
    • Division of labor and matching costs rose
    • Firms and workers became concentrated in * The industrial workforce of the second industrial revolution was composed of immigrants
• Immigrants from numerous different nations with varying skills and physical attributes are likely to have significantly increased the extent of division of labor available in society…

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