O Ring Model Of Economic Development

O ring theory primer michael kremer published the o ring theory of economic development in 1993.

O ring model of economic development.

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. Write a cobb douglas utility function where instead of labor entering as a lump of homogenous efficiency units n units of labor for n tasks must be supplied by n individuals. Its been floating around as a working paper for a few years so its nice to see it get a home. 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.

I also rewatched my video on this paper from tyler s and my online class development economics. The theory was inspired by analysis of the 1986 challenger shuttle disaster where the failure of a single o ring led to catastrophic results. Kremer 1993 the o ring theory is unquestionably one of the most influential papers in applied theory of the past 20 years. Michael kremer formulated the o ring theory in 1993.

The basic idea is simple. The model is consistent with large income differences between countries the predominance of small firms in poor countries and the positive correlation between the wages of workers in different occupations within enterprises. The o ring theory of economic development m. 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.