The division of labor and the extent of the market

Haiwen Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: A firm’s degree of specialization is modeled as the number of different goods it produces. When a firm chooses its degree of specialization, it faces a tradeoff between the fixed cost and the marginal cost of production. A firm’s degree of specialization is shown to increase with the extent of the market. Meanwhile, the real wage rate, as a measure of the extent of the market, is endogenously determined in the model and is shown to increase with the division of labor.

Keywords: Division of labor; Extent of the market; Specialization; Increasing returns to scale (search for similar items in EconPapers)
JEL-codes: A10 (search for similar items in EconPapers)
Date: 2019-01-22
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Published in Economic Theory 1.24(2004): pp. 195-209

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Journal Article: The division of labor and the extent of the market (2004)
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