A NEW THEORY OF INDUSTRIALIZATION

This paper constructs an equilibrium model with consumer-producers, economies of specialization, and transaction costs. The comparative statics of equilibrium can be used to predict several concurrent phenomena associated with an industrialization process: an increase in productivity, an increase in trade dependence, increases in the division of labor and specialization, the emergence of new producer goods at a layer of the hierarchy of goods, and an increase in the number of layers of the hierarchy, increases in the diversity of the economic structure and in the degree of integration of the economy, and an increase in capital goods. (C) 1995 Academic Press, Inc.