Fixed Costs and the Division of Labor

Haiwen Zhou

Annals of Economics and Finance, 2021, vol. 22, issue 1, 63-81

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: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://down.aefweb.net/AefArticles/aef220103Zhou.pdf (application/pdf)

Related works:
Working Paper: Fixed Costs and the Division of Labor (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2021:v:22:i:1:zhou

Access Statistics for this article

Annals of Economics and Finance is currently edited by Heng-fu Zou

More articles in Annals of Economics and Finance from Society for AEF Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().