This paper examines the relationship between specialization and the use of money in two versions of the search-theoretic monetary model. The first version establishes a surprising result that specialization is more likely to occur in a barter economy than in a monetary economy. The result is reversed in the second version where a different specification of preferences is adopted to limit the scope of barter. This contrast between the results provides a concrete illustration of the general argument that money encourages specialization only when it enlarges the extent of the market.
|Original language||English (US)|
|Number of pages||15|
|Publication status||Published - Jun 1 1997|
All Science Journal Classification (ASJC) codes
- Economics and Econometrics