The division of labor and the extent of the market

Haiwen Zhou

Economic Theory, 2004, vol. 24, issue 1, 195-209

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. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Division of labor; Extent of the market; Specialization; Increasing returns to scale. (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00199-003-0415-y

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