PRODUCER SERVICES, SCALE, AND THE DIVISION OF LABOR

This paper develops a model in which increasing returns to scale result from increased degrees of specialization at the firm level, and in which services are important to the coordination and control of specialized, interdependent operations. The relationship of the producer services sector to scale, productivity, and the division of labor is then considered. The model lends insight into the growing importance of the producer service sector in industrial economies. It emphasizes the positive contribution of the producer services sector to the realization of returns due to specialization, and highlights services as a complement rather than a substitute to manufacturing. Copyright 1990 by Royal Economic Society.

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