O-Ring model

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The O-Ring theory of development deals with how firms and economies are organized when one weak link in the production process can destroy the entire value of

The O-Ring theory of development deals with how firms and economies are organized when one weak link in the production process can destroy the entire value of production. The model has implications for wages, inequality, and big push theories of development.

 

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Show 1 Answer (Answer provided by Alex Tabarrok)
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Yes, I have read Moretti's book and I agree that he is interested in explaining some of the same phenomena such as small differences having large effects, agglomeration, talent likes talent and so forth. It would be interesting to compare different explanations for the same phenomena to see if they made testable predictions about other phenomena that could distinguish the theories.

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Yu, Orazem: (http://goo.gl/pHCHx) - "O-Ring Production on U.S. Hog Farms..." supports the model
Dalmazzo, Pekkarinen, Scaramozzino: "O-ring Wage Inequality" (http://goo.gl/F8Mrr) - supports the model
Google Scholar didn't readily produce studies that tested the model and didn't find support for it

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