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Specialization, Firms and Markets: The division of Labour Between and Within Law Firms

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  • Hubbard, Thomas N.
  • Garicano, Luis

Abstract

What is the role of firms and markets in mediating the division of labour? This Paper uses confidential microdata from the Census of Services to examine law firms' boundaries. We first examine how the specialization of lawyers and firms increases as lawyers' returns to specialization increase. In fields where lawyers increasingly specialize with market size, the relationship between the share of lawyers who work in a field-specialized firm and market size indicates whether firms or markets more efficiently mediate relationships between lawyers in this and other fields. We then examine which pairs of specialists tend to work in the same versus different firms; this provides evidence on the scope of firms that are not field-specialized. We find that whether firms or markets mediate the division of labour varies across fields in a way that corresponds to differences in the value of cross-field referrals, consistent with Garicano and Santos' (2001) proposition that firms facilitate specialization by mediating exchanges of economic opportunities more efficiently than markets.

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  • Hubbard, Thomas N. & Garicano, Luis, 2003. "Specialization, Firms and Markets: The division of Labour Between and Within Law Firms," CEPR Discussion Papers 3699, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3699
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    Cited by:

    1. Duranton, Gilles & Jayet, Hubert, 2011. "Is the division of labour limited by the extent of the market? Evidence from French cities," Journal of Urban Economics, Elsevier, vol. 69(1), pages 56-71, January.
    2. Michaels, Guy, 2007. "The division of labor, coordination, and the demand for information processing," LSE Research Online Documents on Economics 3251, London School of Economics and Political Science, LSE Library.
    3. Suzanne Kok, 2013. "Town and city jobs: Your job is different in another location," CPB Discussion Paper 246, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Thomas N. Hubbard, 2008. "Viewpoint: Empirical research on firms' boundaries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(2), pages 341-359, May.

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    More about this item

    Keywords

    Industry structure; Theory of the firm; Specialization; Law firms; Legal services; Economics or organization;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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