Specialization In Legal Services
Specialization and Organization in Legal Services
Project Description
Luis Garicano and Thomas Hubbard
December 6, 2001
Since Adam Smith’s famous ‘pin factory’ fable, economists have been preoccupied with the role that specialization and the division of labor play in economic growth.
Surprisingly, however, this recognition of the fundamental impact that specialization plays in economic growth has not led to much systematic empirical work on the organization of specialization. In fact, no systematic empirical work has illuminated such questions as: When do individuals specialize and how does this relate to the complexity of activities? When do specialists work within the same firm, and when do they work in
different …show more content…
If so, firms in areas where business clients face more complex demands, conditional on their size, should be more likely to have associates but be less leveraged conditional on employing associates than those where business clients face less complicated demands. One could test this by examining whether the probability firms employ associates and firms’ leverage ratio, conditional on employing associates, differ with the composition of local legal service demand, as proxied by the local industrial composition.
An important additional proposition follows from these two points that would allow us to distinguish between the effect of market-based factors affecting all law firms from those above. The empirical propositions above pertain to specialties that serve business clients, not individual clients. Vertical specialization in firms that do not serve business clients
(such as estate or probate lawyers) should neither vary with the size distribution firms
Project Description
Luis Garicano and Thomas Hubbard
December 6, 2001
Since Adam Smith’s famous ‘pin factory’ fable, economists have been preoccupied with the role that specialization and the division of labor play in economic growth.
Surprisingly, however, this recognition of the fundamental impact that specialization plays in economic growth has not led to much systematic empirical work on the organization of specialization. In fact, no systematic empirical work has illuminated such questions as: When do individuals specialize and how does this relate to the complexity of activities? When do specialists work within the same firm, and when do they work in
different …show more content…
If so, firms in areas where business clients face more complex demands, conditional on their size, should be more likely to have associates but be less leveraged conditional on employing associates than those where business clients face less complicated demands. One could test this by examining whether the probability firms employ associates and firms’ leverage ratio, conditional on employing associates, differ with the composition of local legal service demand, as proxied by the local industrial composition.
An important additional proposition follows from these two points that would allow us to distinguish between the effect of market-based factors affecting all law firms from those above. The empirical propositions above pertain to specialties that serve business clients, not individual clients. Vertical specialization in firms that do not serve business clients
(such as estate or probate lawyers) should neither vary with the size distribution firms