Market Size, Division of Labor, and Firm Productivity

Thomas Chaney and Ralph Ossa
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Ralph Ossa: University of Chicago

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Abstract: We generalize Krugman's (1979) ‘new trade' model by allowing for an explicit production chain in which a range of tasks is performed sequentially by a number of specialized teams. We demonstrate that an increase in market size induces a deeper division of labor among these teams which leads to an increase in firm productivity. The paper can be thought of as a formalization of Smith's (1776) famous theorem that the division of labor is limited by the extent of the market. It also sheds light on how market size differences can limit the scope for international technology transfers.

Keywords: Division of labor; Firm productivity; Technology transfer (search for similar items in EconPapers)
Date: 2013-05
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03579667
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Published in Journal of International Economics, 2013, 90 (1), pp.170 - 180. ⟨10.1016/j.jinteco.2012.11.003⟩

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Related works:
Journal Article: Market size, division of labor, and firm productivity (2013)
Working Paper: Market Size, Division of Labor, and Firm Productivity (2013)
Working Paper: Market Size, Division of Labor, and Firm Productivity (2012)
Working Paper: Market Size, Division of Labor, and Firm Productivity (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03579667

DOI: 10.1016/j.jinteco.2012.11.003

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