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The effects of transaction costs and human capital on firm size : a simulation model approach

Listed author(s):
  • Butter, Frank A.G. den

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Gameren, Edwin van
  • Kok, Jan M.P. de
Registered author(s):

    Differences in optimal firm size may only be explained by heterogeneity amongst enterprises and the markets in which they operate. Therefore, the concept of the rep-resentative enterprise from the traditional theory of the firm is not helpful in explaining size differences. Differences in firm size may better be explained using recent developments in labour economics that stress the heterogeneity of workers and enterprises. In this paper, we exploit these new developments in labour economics by building a simulation model of the firm, which explicitly considers the link between internal and external labour markets and the resulting worker flows. Simulations with the model show how factors that account for differences in transaction costs and for heterogeneity of workers generate enterprises of different sizes.

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    File URL: http://degree.ubvu.vu.nl/repec/vua/wpaper/pdf/20010010.pdf
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    Paper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0010.

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    Date of creation: 2001
    Handle: RePEc:vua:wpaper:2001-10
    Contact details of provider: Web page: http://www.feweb.vu.nl
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    1. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75, pages 123-123.
    2. Davis, Steven J & Henrekson, Magnus, 1999. "Explaining National Differences in the Size and Industry Distribution of Employment," Small Business Economics, Springer, vol. 12(1), pages 59-83, February.
    3. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-952, October.
    4. Pfann, Gerald A. & Verspagen, Bart, 1989. "The structure of adjustment costs for labour in the Dutch manufacturing sector," Economics Letters, Elsevier, vol. 29(4), pages 365-371.
    5. Almus, Matthias & Nerlinger, Eric A, 1999. "Growth of New Technology-Based Firms: Which Factors Matter?," Small Business Economics, Springer, vol. 13(2), pages 141-154, September.
    6. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters,in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
    7. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    8. Michael Keren & David Levhari, 1979. "The Optimum Span of Control in a Pure Hierarchy," Management Science, INFORMS, vol. 25(11), pages 1162-1172, November.
    9. N/A, 1996. "Note:," Foreign Trade Review, , vol. 31(1-2), pages 1-1, January.
    10. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
    11. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 881-919.
    12. Boone, Christophe & van Witteloostuijn, Arjen, 1996. "Industry Competition and Firm Human Capital," Small Business Economics, Springer, vol. 8(5), pages 347-364, October.
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