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Change in Fixed Costs and the Division of Labor within Firms through Labor Reallocation

Author

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  • Shintaku, Koji

Abstract

This paper investigates the effects of a decrease in fixed costs on the division of labor within firms. In the constant markup rate model, a decrease in fixed costs curbs the division of labor. In the short run, the division of labor is promoted through labor reallocation within firms while in the long run, the division of labor is curbed through labor reallocation across firms. The latter effect dominates the former effect. In the variable markup rate model whose markup rate depends on the number of firms, the decrease in fixed costs induces labor reallocation across firms which is the opposite direction of that of the constant markup rate model in addition. The direction of labor reallocation across firms based on procompetition is opposite to that of the model of Kamei (2014) which does not impose free-entry and free-exit condition. The free-entry and free-exit condition plays a key role in determining the direction of that reallocation based on procompetition effect.

Suggested Citation

  • Shintaku, Koji, 2015. "Change in Fixed Costs and the Division of Labor within Firms through Labor Reallocation," MPRA Paper 62644, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62644
    as

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    File URL: https://mpra.ub.uni-muenchen.de/62644/1/MPRA_paper_62644.pdf
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    References listed on IDEAS

    as
    1. Chaney, Thomas & Ossa, Ralph, 2013. "Market size, division of labor, and firm productivity," Journal of International Economics, Elsevier, vol. 90(1), pages 177-180.
    2. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 299-322, National Bureau of Economic Research, Inc.
    3. repec:spo:wpmain:info:hdl:2441/312fvs95ub8ct80ng4em8fjifb is not listed on IDEAS
    4. Kamei, Keita, 2014. "Pro-competitive effect, division of labor, and firm productivity," Economics Letters, Elsevier, vol. 124(1), pages 132-135.
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    Cited by:

    1. Shintaku, Koji, 2015. "Export Decision, the Division of Labor, and Skill Intensity," MPRA Paper 64654, University Library of Munich, Germany, revised 25 May 2015.
    2. Shintaku, Koji, 2015. "Heterogeneous Fixed Export Costs and the Division of Labor," MPRA Paper 64655, University Library of Munich, Germany, revised 25 May 2015.

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    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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