Small firms invest relatively less in custom-made machines and specifically trained employees. The overhead costs of fixed-capital assets are relatively larger for big firms that engage in the volume production of standardized products. Large firms also incur higher fixed employment costs to recruit and train a specialized workforce. Workers in large firms are paid higher wages designed to reduce labour turnover rates. These phenomena could not be explained without a formal analysis of fixed and quasi-fixed factors. A continuum of degrees of fixity makes for a richer theory of factor markets than a dichotomy of fixed versus variable factors.
KeywordsAmortization Barriers to entry Clark, J. M. Elasticity of substitution Firm size Firm-specific factors Fixed factors Human capital Implicit contracts Labour as a quasifixed factor Labour market search Labour markets contracts Monitoring costs Overhead costs Rationing Shadow price Specialization Substitutes and complements Training Wage differentials
- Clark, J.M. 1923. Studies in the economics of overhead costs. Chicago: University of Chicago Press.Google Scholar
- Hutt, W.H. 1977. The theory of idle resources. Indianapolis: Liberty Press.Google Scholar
- Oi, W.Y. 1983. The fixed employment costs of specialized labor. In The measurement of labor costs, ed. J.E. Triplett. Chicago: University of Chicago Press.Google Scholar