O Ring Model Economics

Michael kremer s nobel prize with duflo and banerjee reminded me of his important paper the o ring theory of development.

O ring model economics.

The o ring that cost less than 1 which caused the challenger shuttle crash. Kremer s o ring model basic idea. October 29 2019 at 4 16 am kremer m 1993a the o ring theory of economic development quarterly journal of economics 108 3. Michael kremer formulated the o ring theory in 1993.

The latest issue of the journal of economic behavior and organization has a new paper by garett jones ungated version here on 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. Its been floating around as a working paper for a few years so its nice to see it get a home. The key feature of this model is positive assortative matching whereby people with similar skill levels work together.

In his model a product may founder from the mistake of a. O rings malfunctioned during launch. But before i post about that paper i thought. For example in an automobile factory one task might be installing the brakes and in a restaurant one task might be waiting on tables.

The o ring production function consider a firm using a production process consisting of n tasks. This was from our. The o ring theory is an elegant model of complementary inputs and labor market sorting where slightly better what randomisation can and cannot do. The o ring theory 553 i.

The o ring production function and applications i. Modern production requires each of many activities to be done well for the output to have high value strong complementarity in technology. 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. Using this as a leading example kremer 1993 studies production processes in which the value of output may dramatically decrease due to the failure of a single task.

The o ring model of development. The 2019 nobel prize finanz dk says. 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.