اندازه بازار، تقسیم کار و بهره وری شرکت

We generalize Krugman's (1979) ‘new trade’ model by allowing for an explicit production chain in which a range of tasks is performed sequentially by a number of specialized teams. We demonstrate that an increase in market size induces a deeper division of labor among these teams which leads to an increase in firm productivity. The paper can be thought of as a formalization of Smith's (1776) famous theorem that the division of labor is limited by the extent of the market. It also sheds light on how market size differences can limit the scope for international technology transfers.

In this paper, we develop a simple general equilibrium model in which an increase in market size leads to an increase in the division of labor which brings about an increase in firm productivity. In particular, we generalize Krugman's (1979) seminal ‘new trade’ model by opening the black box of the production function and allowing for an explicit production chain in which a range of tasks is performed sequentially by a number of specialized production teams. An increase in market size induces a deeper division of labor among these teams which leads to an increase in firm productivity. Underlying this is a trade-off between the fixed costs associated with establishing a team and the marginal costs associated with the degree of specialization of the team which firms solve differently depending on the size of the market.

“As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.” In this paper, we have demonstrated that this famous theorem of Smith (1776: 16) can be rationalized by embedding a production chain of the sort found in his pin factory into Krugman's (1979) seminal ‘new trade’ environment. In a nutshell, we first established that the division of labor is limited by the extent of firm output and then demonstrated that firm output is increasing in the extent of the market. We also showed that in such an environment, seemingly superior technologies developed in large markets may not be appropriate for smaller markets thus limiting the scope for international technology transfers.