Munich Personal RePEc Archive

Division of Labor and Switch Cost

Ang, Joshua Ping (2019): Division of Labor and Switch Cost.

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Abstract

Specialized production tasks are often performed by laborers equipped with the same technical capabilities to accomplish other tasks equally well. I demonstrate how production among laborers given identical technology with no comparative advantage leads to a complete specialization of different tasks. The switch cost between production tasks is formalized to show how the divi- sion of labor maximizes the output with the same technology among laborers. The degree of specialization is limited by the cost of switching among tasks. The improvement in technology in production that reduces switch cost makes workers choose to be less specialized.

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