Division of Labor under Perfect Competition

Authors: Puqing Lai, Till Requate (Singapore Economic Review, 2020: 1–9)

This paper develops a simple model of division of labor under perfect competition. The model shows under that the division of labor is compatible with perfectly competitive markets if coordination costs are increasing with the number of teams. We also show under what conditions interior solutions for the division of labor exist under imperfect competition.

Keywords: Division of labor, increasing returns, market size, perfect competition

JEL: D00, D20, D40

DOI: https://doi.org/10.1142/S0217590820500265