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The Plant Size-Place Effect: Agglomeration and Monopsony in Labour Markets

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  • Alan Manning

Abstract

This paper shows, using data from both the US and the UK, that average plant size is larger in denser markets. However, many popular theories of agglomeration - spillovers, cost advantages and improved match quality - predict that establishments should be smaller in cities. The paper proposes a theory based on monopsony in labour markets that can explain the stylized fact - that firms in all labour markets have some market power but that they have less market power in cities. It also presents evidence that the labour supply curve to individual firms is more elastic in larger markets.

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File URL: http://cep.lse.ac.uk/pubs/download/dp0773.pdf
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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0773.

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Date of creation: Jan 2007
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Handle: RePEc:cep:cepdps:dp0773

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: Agglomeration; Labour Markets; Monopsony;

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  1. L. Rachel Ngai & Roberto M. Samaniego, 2006. "An R&D-based model of multi-sector growth," LSE Research Online Documents on Economics 3527, London School of Economics and Political Science, LSE Library.
  2. Stephen J Redding & Peter K Schott & Andrew B Bernard, 2007. "Multi-product Firms and Trade Liberalization," 2007 Meeting Papers 44, Society for Economic Dynamics.
  3. Rachel L. Ngai, 2007. "An R&D-based Model of Multi-sector Growth," 2007 Meeting Papers 349, Society for Economic Dynamics.
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