The model developed here explains differences in the degree of the division of labor across local markets. For example, the typical doctor in one local market may treat a wider range of patients' problems than his counterpart in another local market. The extent of the division of labor depends on variables affecting the local demand for services. Two different forms of worker organization, cooperation and noncooperation, yield divergent results. For example, specialization increases with the local number of producers under cooperation but may decrease under noncooperation. With the number of producers constant, local demand variables affect individual specialization under noncooperation but not under cooperation.

This paper reports empirical evidence of systematic cross-locale variation in the degree of division of labor among physicians. A theoretical model--based on an individual producer's trade-off between increasing returns and falling marginal revenue within each activity--motivates the empirical tests. At two levels of aggregation, specialization is correlated with local demand shifters for medical services. At the individual level, I find systematic differences in the range of procedures performed within a specialty class. General practitioners working fewer hours, practicing in more populated counties, or practicing in countries with more elderly produce a narrower range of procedures.

The model developed here explains differences in the degree of the division of labor across local markets. For example, the typical doctor in one local market may treat a wider range of patients' problems than his counterpart in another local market. The extent of the division of labor depends on variables affecting the local demand for services. Two different forms of worker organization, cooperation and noncooperation, yield divergent results. For example, specialization increases with the local number of producers under cooperation but may decrease under noncooperation. With the number of producers constant, local demand variables affect individual specialization under noncooperation but not under cooperation.

This paper reports empirical evidence of systematic cross-locale variation in the degree of division of labor among physicians. A theoretical model--based on an individual producer's trade-off between increasing returns and falling marginal revenue within each activity--motivates the empirical tests. At two levels of aggregation, specialization is correlated with local demand shifters for medical services. At the individual level, I find systematic differences in the range of procedures performed within a specialty class. General practitioners working fewer hours, practicing in more populated counties, or practicing in countries with more elderly produce a narrower range of procedures.