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A Theory of Factor Allocation and Plant Size

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  • Thomas J. Holmes
  • Matthew F. Mitchell

Abstract

In this paper we develop a theory of how factors interact at the plant level. The theory has implications for: (1) the micro foundations for capital skill complementarity (2) the relationship between factor allocation and plant size and (3) the effects of trade and growth on the skill premium. The theory is consistent with certain facts about factor allocation and factor price changes in the 19th and 20th centuries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10079.

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Date of creation: Nov 2003
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Publication status: published as Thomas J. Holmes & Matthew F. Mitchell, 2008. "A theory of factor allocation and plant size," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 329-351.
Handle: RePEc:nbr:nberwo:10079

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  1. Kenneth R Troske, 1994. "Evidence on the Employer Size-Wage Premium From Worker-Establishment Matched Data," Working Papers 94-10, Center for Economic Studies, U.S. Census Bureau.
  2. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
  3. Brown, Martin & Philips, Peter, 1986. "Craft Labor and Mechanization in Nineteenth-Century American Canning," The Journal of Economic History, Cambridge University Press, vol. 46(03), pages 743-756, September.
  4. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  5. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  6. Matthew F. Mitchell, 2001. "Specialization and the skill premium in the 20th century," Staff Report 290, Federal Reserve Bank of Minneapolis.
  7. Todd Idson, 2000. "Employer Size Effects in Russia," William Davidson Institute Working Papers Series 300, William Davidson Institute at the University of Michigan.
  8. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins Of Technology-Skill Complementarity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 693-732, August.
  9. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  10. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
  11. Markus Mobius & Raphael Schoenle, 2006. "The Evolution of Work," NBER Working Papers 12694, National Bureau of Economic Research, Inc.
  12. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
  13. Jeremy Atack & Fred Bateman & Robert A. Margo, 2000. "Rising Wage Dispersion Across American Manufacturing Establishments, 1850-1880," NBER Working Papers 7932, National Bureau of Economic Research, Inc.
  14. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  15. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
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Cited by:
  1. Cardoso, Ana Rute & Neuman, Shoshana & Ziderman, Adrian, 2006. "Wage Mobility in Israel: The Effect of Sectoral Concentration," IZA Discussion Papers 2335, Institute for the Study of Labor (IZA).
  2. Richard Walker, 2005. "Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution," CEP Discussion Papers dp0707, Centre for Economic Performance, LSE.
  3. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370 Elsevier.
  4. Stijepic, Damir, 2013. "Successive Technical Change and the Demand for Skill," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79870, Verein für Socialpolitik / German Economic Association.
  5. Thomas Holmes, 2004. "EconomicDynamics Interviews Thomas Holmes on Dynamic Economic Geography," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 6(1), November.
  6. Richard Walker, 2005. "Superstars and renaissance men: specialization, market size and the income distribution," LSE Research Online Documents on Economics 19880, London School of Economics and Political Science, LSE Library.
  7. Gavilan, Angel, 2012. "Wage inequality, segregation by skill and the price of capital in an assignment model," European Economic Review, Elsevier, vol. 56(1), pages 116-137.
  8. Kurokawa, Yoshinori, 2010. "Fixed cost, number of firms, and skill premium: An alternative source for rising wage inequality," Economics Letters, Elsevier, vol. 108(2), pages 141-144, August.

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