Advanced Search
MyIDEAS: Login to save this paper or follow this series

Specialization, Firms, and Markets: The Division of Labor Within and Between Law Firms

Contents:

Author Info

  • Luis Garicano
  • Thomas N. Hubbard

Abstract

What is the role of firms and markets in mediating the division of labor? This paper uses confidential microdata from the Census of Services to examine law firms' boundaries. We find that firms' field scope narrows as market size increases and individuals specialize, indicating that firms' boundaries reflect organizational trade-offs. Moreover, we find that whether the division of labor is mediated by firms differs systematically according to whether lawyers in a particular field are mainly involved in structuring transactions or in dispute resolution. Our evidence is consistent with hypotheses in which firms' boundaries reflect variation in the value of knowledge-sharing or in the costs of monitoring, but not in risk-sharing. Our findings show how the incentive trade-offs associated with exploiting increasing returns from specialization lead the structure of the industry to be fragmented, but highly-skewed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w9719.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9719.

as in new window
Length:
Date of creation: May 2003
Date of revision:
Publication status: published as Garicano, Luis and Thomas N. Hubbard. "Specialization, Firms, and Markets: The Division of Labor within and between Law Firms." Journal of Law, Economics, and Organization 25, 2 (2009): 339-371.
Handle: RePEc:nbr:nberwo:9719

Note: IO
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  2. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  3. Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
  4. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers, Stanford - Studies in Industry Economics 151, Stanford - Studies in Industry Economics.
  5. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, Econometric Society, vol. 70(4), pages 1445-1476, July.
  6. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  7. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
  8. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  9. Luis Garicano & Thomas N. Hubbard, 2003. "Firms' Boundaries and the Division of Labor: Empirical Strategies," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(2-3), pages 495-502, 04/05.
  10. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 56-62, May.
  11. Olsen, Trond E & Torsvik, Gaute, 2000. "Discretion and Incentives in Organizations," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 377-404, July.
  12. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
  13. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 21(2), pages 297-326, October.
  14. Hubbard, Thomas N, 2001. "Contractual Form and Market Thickness in Trucking," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 369-86, Summer.
  15. Klemperer, Paul, 1992. "Equilibrium Product Lines: Competing Head-to-Head May Be Less Competitive," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 740-55, September.
  16. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. Jonathan Levin, 2002. "A Theory of Partnerships," Theory workshop papers, UCLA Department of Economics 505798000000000002, UCLA Department of Economics.
  19. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 59, pages 185.
  20. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 972-91, September.
  21. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 15(1), pages 74-102, April.
  22. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 1(1), pages 43-49, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Garicano, Luis & Hubbard, Thomas N., 2005. "Hierarchical sorting and learning costs: Theory and evidence from the law," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 58(2), pages 349-369, October.
  2. Stuart S. Rosenthal & William C. Strange, 2010. "Small Establishments/Big Effects: Agglomeration, Industrial Organization and Entrepreneurship," NBER Chapters, in: Agglomeration Economics, pages 277-302 National Bureau of Economic Research, Inc.
  3. Garicano, Luis & Hubbard, Thomas, 2007. "The Return to Knowledge Hierarchies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6077, C.E.P.R. Discussion Papers.
  4. Casey Ichniowski & Kathryn L. Shaw, 2009. "Insider Econometrics: Empirical Studies of How Management Matters," NBER Working Papers 15618, National Bureau of Economic Research, Inc.
  5. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," Discussion Papers, Stanford Institute for Economic Policy Research 07-048, Stanford Institute for Economic Policy Research.
  6. Thomas Hubbard & Luis Garicano, 2004. "Hierarchies, Specialization, and the Utilization of Knowledge: Theory and Evidence from the Legal Services Industry," Working Papers 04-07, Center for Economic Studies, U.S. Census Bureau.
  7. Parama Chaudhury, 2010. "Multi-tasking and the Returns to Experience," Economics Series Working Papers 518, University of Oxford, Department of Economics.
  8. Casey Ichniowski & Kathryn Shaw, 2004. "Using "Insider Econometrics" to Study Productivity," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 217-223, May.
  9. Frank Limehouse & Robert McCormick, 2011. "Impacts of Central Business District Location: A Hedonic Analysis of Legal Service Establishments," Working Papers 11-21, Center for Economic Studies, U.S. Census Bureau.
  10. Alberto Battistini, 2008. "Micro-Founded Institutions and Macro-Founded Individuals: The Dual Nature of Profit," Department of Economics University of Siena, Department of Economics, University of Siena 550, Department of Economics, University of Siena.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9719. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.