Division of Labor, Transaction Cost, Emergence of the Firm and Firm Size

Preprint OPEN
Pak-Wai Liu; Xiaokai Yang;
  • Subject: irrelevance of size of the firm, division of labor, theory of the firm
    • jel: jel:D23 | jel:L11 | jel:L22 | jel:L23 | jel:L33

In this paper a general equilibrium model is constructed to explain the emergence of firms and change in firm size by the tradeoff between economies of specialization and transaction cost. We show that firms emerge from the development of division of labor if the transa... View more
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