The O Ring Theory Of Economic Development

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.

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. Characterization of optimal growth paths in an aggregated model with a non concave production function journal of economic theory elsevier vol. Michael kremer formulated the o ring theory in 1993. 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 o ring theory of economic development michael kremer this paper proposes a production function describing processes subject to mistakes in any of several tasks. 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 key feature of this model is positive assortative matching whereby people with similar skill levels work together. This paper proposes a production function describing processes subject to mistakes in any of several tasks.