The O Ring Theory Of Economic Development

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. 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. Characterization of optimal growth paths in an aggregated model with a non concave production function journal of economic theory elsevier vol. 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.

31 2 pages 332 354 december. 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. 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 key feature of this model is positive assortative matching whereby people with similar skill levels work together.