The O Ring Theory Of Economic Development

It shows that high skill workers those who make few mistakes will be matched together in equilibrium and that wages and output will rise steeply in skill.

The o ring theory of economic development.

The o ring theory of economic development michael kremer this paper proposes a production function describing processes subject to mistakes in any of several tasks. His article the o ring theory of economic development published in the quarterly journal of economics presents a production function in which production consists of many tasks all of which must be successfully completed for the product to have full value mistakes can be extremely costly reducing the. Also known as the o ring model of economic development this refers to the theory that even the smallest components of a complex production process must be performed properly if the end product of the. It shows that high skill workers those who make few mistakes will be matched together in equilibrium and that wages and output will rise steeply in skill.

This paper proposes a production function describing processes subject to mistakes in any of several tasks. Characterization of optimal growth paths in an aggregated model with a non concave production function journal of economic theory elsevier vol. The o ring theory of economic development is a model of economic development put forward by michael kremer in 1993 which proposes that tasks of production must be executed proficiently together in order for any of them to be of high value. The key feature of this model is positive assortative matching whereby people with similar skill levels work together.