Market Size, Division of Labor, and Firm Productivity
AbstractWe 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18243.
Date of creation: Jul 2012
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Other versions of this item:
- Chaney, Thomas & Ossa, Ralph, 2013. "Market size, division of labor, and firm productivity," Journal of International Economics, Elsevier, vol. 90(1), pages 177-180.
- Chaney, Thomas & Ossa, Ralph, 2012. "Market Size, Division of Labor, and Firm Productivity," CEPR Discussion Papers 9069, C.E.P.R. Discussion Papers.
- F10 - International Economics - - Trade - - - General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
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- Kamei, Keita, 2013. "Trade Liberalization, Division of Labor, and Firm Productivity," MPRA Paper 50301, University Library of Munich, Germany.
- Kwok Tong Soo, 2013. "The gains from the division of labour and comparative advantage," Working Papers 33867696, Lancaster University Management School, Economics Department.
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