The Provision of Collective Goods through a Social Division of Labour

This paper develops a general equilibrium framework of a continuum economy in which collective goods are provided by specialised professionals as part of an endogenously emerging social division of labour. It merges the notion of valuation equilibrium in an economy with collective goods with the model of a private-goods market economy with an endogenously emerging social division of labour. Th is incorporates Adam Smith’s principle of increasing returns to specialisation into the foundations of an the economy’s ability to deliver collective goods. We introduce the appropriate generalised notion of valuation equilibrium in this sett ing and prove the first and second welfare theorems for this notion, enhancing the standard framework of an economy with (non-Samuelsonian) collective goods and multiple private goods.