10.4225/03/5937475d1c1bc Sun, Guang-Zhen Guang-Zhen Sun Knowledge, Specialization, Consumption Variety and Trade Dependence Monash University 2017 knowledge CES utility function 2003 consumption variety specialization and division of labor trade dependence monash:2221 1959.1/2221 transaction costs 2017-06-07 00:22:51 Journal contribution https://bridges.monash.edu/articles/journal_contribution/Knowledge_Specialization_Consumption_Variety_and_Trade_Dependence/5084581 This paper provides an analysis of how the development in knowledge results in expanding the consumption variety via promoting specialization and trade dependence. Gains from specialization and trade are reaped with increasing costs for transacting and with increasing interdependence among agents. As such, consumption variety, specialization, transaction costs (in both absolute magnitude and percentage of the total output of the economy), and trade dependence all evolve. Some preliminary empirical evidence consistent with our theory is also presented.