Fixed Costs and the Division of Labor
Haiwen Zhou
MPRA Paper from University Library of Munich, Germany
Abstract:
How market size and the level of coordination costs determine the degree of specialization is studied in an infinite horizon model with the amount of capital determined endogenously. Firms producing the same intermediate good engage in oligopolistic competition and choose the degree of specialization of their technologies to maximize profits. A more specialized technology is a technology with a lower marginal cost, but a higher fixed cost. Interestingly, the relationship between the level of coordination costs and a firm’s degree of specialization is ambiguous. A firm in a country with a larger market size, more patient citizens, or a higher amount of knowledge will choose more specialized technologies and this country will have a higher wage rate and a higher capital stock. If fixed costs decrease, firms will choose more flexible manufacturing.
Keywords: The division of labor; market size; fixed costs; flexible manufacturing; coordination costs (search for similar items in EconPapers)
JEL-codes: D43 L13 O14 (search for similar items in EconPapers)
Date: 2020-10-19
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com and nep-ind
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Related works:
Journal Article: Fixed Costs and the Division of Labor (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:103674
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