Change in Fixed Costs and the Division of Labor within Firms through Labor Reallocation

Koji Shintaku

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the effects of a decrease in fixed costs on the division of labor within firms. In the constant markup rate model, a decrease in fixed costs curbs the division of labor. In the short run, the division of labor is promoted through labor reallocation within firms while in the long run, the division of labor is curbed through labor reallocation across firms. The latter effect dominates the former effect. In the variable markup rate model whose markup rate depends on the number of firms, the decrease in fixed costs induces labor reallocation across firms which is the opposite direction of that of the constant markup rate model in addition. The direction of labor reallocation across firms based on procompetition is opposite to that of the model of Kamei (2014) which does not impose free-entry and free-exit condition. The free-entry and free-exit condition plays a key role in determining the direction of that reallocation based on procompetition effect.

Keywords: fixed costs; division of labor within firms; labor reallocation (search for similar items in EconPapers)
JEL-codes: E23 E24 J24 L16 L22 (search for similar items in EconPapers)
Date: 2015-03-06
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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