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

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Alan Manning

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Abstract

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

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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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Related research
Keywords: Agglomeration; Labour Markets; Monopsony;

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Find related papers by JEL classification:
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
R23 - Urban, Rural, and Regional Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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  3. L. Rachel Ngai & Roberto M. Samaniego, 2006. "An R&D-Based Model of Multi-Sector Growth," CEP Discussion Papers dp0762, Centre for Economic Performance, LSE. [Downloadable!]
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  18. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004. "Spatial Wage Disparities: Sorting Matters!," CEPR Discussion Papers 4240, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  19. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier. [Downloadable!] (restricted)
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