On the Microeconomics of Specialization: the Role of Non-Convexity
Jean-Paul Chavas () and
Kwansoo Kim ()
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Kwansoo Kim: Seoul National University
Atlantic Economic Journal, 2016, vol. 44, issue 3, 387-403
Abstract This paper investigates the microeconomics of specialization and its effects on firm productivity. We define economies of specialization as the productivity gains obtained under greater specialization. The paper shows how scale effects and non-convex technology affect economies of specialization. Using a nonparametric approach, we present an empirical analysis applied to Korean farms. The results indicate that non-convexity is prevalent especially on large farms. We find that non-convexity generates large productivity benefits from specialization on larger farms (but not on smaller farms), providing a strong incentive for large farms to specialize. We evaluate the linkages between non-convexity, firm size and management.
Keywords: Firm productivity; Scale; Non-convexity; Specialization; D2; L25; Q12 (search for similar items in EconPapers)
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