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On the Microeconomics of Specialization: the Role of Non-Convexity

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  • Jean-Paul Chavas

    (University of Wisconsin)

  • Kwansoo Kim

    (Seoul National University)

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.

Suggested Citation

  • Jean-Paul Chavas & Kwansoo Kim, 2016. "On the Microeconomics of Specialization: the Role of Non-Convexity," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 387-403, September.
    • Handle: RePEc:kap:atlecj:v:44:y:2016:i:3:d:10.1007_s11293-016-9507-5
    DOI: 10.1007/s11293-016-9507-5
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    References listed on IDEAS

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