Document Type
Article
Publication Date
2021
Publication Title
Annals of Economics and Finance
Volume
22
Issue
1
Pages
63-81
Abstract
How market size and the level of coordination costs determine the degree of specialization is studied in an infinite horizon model with the amount of capital determined endogenously. Firms producing the same intermediate good engage in oligopolistic competition and choose the degree of specialization of their technologies to maximize profits. A more specialized technology is a technology with a lower marginal cost, but a higher fixed cost. Interestingly, the relationship between the level of coordination costs and a firm’s degree of specialization is ambiguous. A firm in a country with a larger market size, more patient citizens, or a higher amount of knowledge will choose more specialized technologies and this country will have a higher wage rate and a higher capital stock. If fixed costs decrease, firms will choose more flexible manufacturing.
Rights
© 2021 Annals of Economics and Finance.
Included with the kind written permission of the copyright holder.
Original Publication Citation
Zhou, H. (2021). Fixed costs and the division of labor. Annals of Economics and Finance, 22(1), 63-81. http://aeconf.com/Articles/May2021/aef220103.pdf
Repository Citation
Zhou, Haiwen, "Fixed Costs and the Division of Labor" (2021). Economics Faculty Publications. 55.
https://digitalcommons.odu.edu/economics_facpubs/55