Uncertainty and the Optimal Level of Specialization. Di Maio, M. and Valente, M. 66(3):213–218.
Uncertainty and the Optimal Level of Specialization [link]Paper  doi  abstract   bibtex   
Using a two-sector one-factor comparative-advantage-based trade model under uncertainty, we show that (1) to specialize according to comparative advantages may be sub-optimal in a multi-period setting; (2) there are conditions under which, even if agents are risk-neutral, the decentralized solution is inefficient and characterized by overspecialization. ⺠Comparative-advantage-induced full specialization may be sub-optimal in a multi-period setting. ⺠The centralized and the decentralized optimal level of specialization are different in a multi-period setting. ⺠The decentralized optimal level of specialization is inefficient and characterized by overspecialization.
@article{dimaioUncertaintyOptimalLevel2012,
  title = {Uncertainty and the Optimal Level of Specialization},
  author = {Di Maio, Michele and Valente, Marco},
  date = {2012-09},
  journaltitle = {Research in Economics},
  volume = {66},
  pages = {213--218},
  issn = {1090-9443},
  doi = {10.1016/j.rie.2012.04.001},
  url = {https://doi.org/10.1016/j.rie.2012.04.001},
  abstract = {Using a two-sector one-factor comparative-advantage-based trade model under uncertainty, we show that (1) to specialize according to comparative advantages may be sub-optimal in a multi-period setting; (2) there are conditions under which, even if agents are risk-neutral, the decentralized solution is inefficient and characterized by overspecialization. ⺠Comparative-advantage-induced full specialization may be sub-optimal in a multi-period setting. ⺠The centralized and the decentralized optimal level of specialization are different in a multi-period setting. ⺠The decentralized optimal level of specialization is inefficient and characterized by overspecialization.},
  keywords = {*imported-from-citeulike-INRMM,~INRMM-MiD:c-10618916,competition,economics,local-over-complication,overspecialization,uncertainty},
  number = {3}
}
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