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

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Author Info
Alan Manning (London School of Economics)

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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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Publisher Info
Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1109.

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Date of creation: Dec 2008
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Handle: RePEc:pri:indrel:1109

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Related research
Keywords: Agglomeration; Labour Markets; Monopsony; monopsony papers;

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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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  5. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September. [Downloadable!] (restricted)
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  14. Krugman, Paul, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-74, Spring. [Downloadable!] (restricted)
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  17. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of 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 49, pages 2119-2171 Elsevier. [Downloadable!] (restricted)
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  19. 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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