We use a one-factor two-sector model of comparative advantage with uncertainty to compare the effects of different specialization levels on growth under various scenarios. We derive the static and dynamic optimal level of specialization under the centralized and the decentralized economy. We identify the conditions under which the socially optimal specialization level entails positive investment in the comparatively disadvantaged sector. We show that in this case the socially optimal solution cannot be reached by the decentralized economy which is in fact characterized by over-specialization. We conclude presenting a simple tax-based redistributive mechanism able to achieve the optimal level of specialization in a decentralized economic system
Uncertainty, Specialization and Government Intervention / Di Maio, M; Valente, M.. - In: METROECONOMICA. - ISSN 0026-1386. - 64:2(2013), pp. 215-224. [10.1111/meca.12003]
Uncertainty, Specialization and Government Intervention
Di Maio M;
2013
Abstract
We use a one-factor two-sector model of comparative advantage with uncertainty to compare the effects of different specialization levels on growth under various scenarios. We derive the static and dynamic optimal level of specialization under the centralized and the decentralized economy. We identify the conditions under which the socially optimal specialization level entails positive investment in the comparatively disadvantaged sector. We show that in this case the socially optimal solution cannot be reached by the decentralized economy which is in fact characterized by over-specialization. We conclude presenting a simple tax-based redistributive mechanism able to achieve the optimal level of specialization in a decentralized economic systemI documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
