The Division of Labour

Ekkehart Schlicht

in On Custom in the Economy

Published in print March 1998 | ISBN: 9780198292241
Published online November 2003 | e-ISBN: 9780191596865 | DOI:
 The Division of Labour

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Smith's theorem—that the division of labour is limited by the extent of the market—is explained. But there exists another limitation to the division of labour that relates to the nature of the task. Further, the division of labour can be coordinated alternatively by markets or by the coordination mechanisms available within firms that rely heavily on custom. It is argued that coordination within firms entails productivity advantages at the expense of inflexibility in certain dimensions, whereas the market requires standardization of some sort, but is more flexible in other ways.

Keywords: custom; division of labour; firms; flexibility; markets; productivity; Smith's theorem; standardization; task interdependence; task separability

Chapter.  8135 words. 

Subjects: Microeconomics

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