Toward a Unified Transaction Cost Theory of Economic Organization
This paper develops a general equilibrium model endogenizing labor specialization, firm size, firm specialization, interfirm trade, and economic fragmentation. In contrast to the standard neoinstitutionalist understanding of firms and markets as substitutes in organizing production, firms and markets are shown to be complements in reaping economies to the division of labor. As a result, firm size varies directly, rather than inversely, with the extent of interfirm trade. Growth is facilitated by increases in the complexity of economic organization, involving increases in the division of labor, the size and specialization of firms, market size, and the complexity of interfirm trade.
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Volume (Year): 159 (2003)
Issue (Month): 3 (September)
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References listed on IDEAS
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- Krugman, Paul, 1994. "Complex Landscapes in Economic Geography," American Economic Review, American Economic Association, vol. 84(2), pages 412-416, May.
- Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
- Barzel, Yoram & Yu, Ben T, 1984. "The Effect of the Utilization Rate on the Division of Labor," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 18-27, January.
- Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
- Tamura, R., 1991.
"Efficient Equilibrium Convergence : Heterogeneity and Growth,"
91-16, University of Iowa, Department of Economics.
- Tamura, Robert, 1992. "Efficient equilibrium convergence: Heterogeneity and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 355-376, December.
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