Money and specialization

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Abstract

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 languageEnglish (US)
Pages (from-to)99-113
Number of pages15
JournalEconomic Theory
Volume10
Issue number1
Publication statusPublished - Jun 1 1997

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All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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