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The division of labor and the extent of the market

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  • Zhou, Haiwen

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.

Suggested Citation

  • Zhou, Haiwen, 2019. "The division of labor and the extent of the market," MPRA Paper 91655, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:91655
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    References listed on IDEAS

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    More about this item

    Keywords

    Division of labor; Extent of the market; Specialization; Increasing returns to scale;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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