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The plant size-place effect: agglomeration and monopsony in labour markets

  • Alan Manning

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://hdl.handle.net/10.1093/jeg/lbp042
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Article provided by Oxford University Press in its journal Journal of Economic Geography.

Volume (Year): 10 (2010)
Issue (Month): 5 (September)
Pages: 717-744

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Handle: RePEc:oup:jecgeo:v:10:y:2010:i:5:p:717-744
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  1. Stephen J Redding & Peter K Schott & Andrew B Bernard, 2007. "Multi-product Firms and Trade Liberalization," 2007 Meeting Papers 44, Society for Economic Dynamics.
  2. 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.
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