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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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Suggested Citation

  • Alan Manning, 2010. "The plant size-place effect: agglomeration and monopsony in labour markets," Journal of Economic Geography, Oxford University Press, vol. 10(5), pages 717-744, September.
  • Handle: RePEc:oup:jecgeo:v:10:y:2010:i:5:p:717-744
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    Citations

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    Cited by:

    1. Olga Ivanova & d'Artis Kancs & Dirk Stelder, 2009. "Modelling Inter-Regional Trade Flows: Data and Methodological Issues in Rhomolo," EERI Research Paper Series EERI RP 2009/31, Economics and Econometrics Research Institute (EERI), Brussels.
    2. Marie Drolet & Karen Mumford, 2012. "The Gender Pay Gap for Private-Sector Employees in Canada and Britain," British Journal of Industrial Relations, London School of Economics, vol. 50(3), pages 529-553, September.
    3. Clémence Berson, 2016. "Local labor markets and taste-based discrimination," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-21, December.
    4. Kichko, Sergey & Kokovin, Sergey & Zhelobodko, Evgeny, 2014. "Trade patterns and export pricing under non-CES preferences," Journal of International Economics, Elsevier, vol. 94(1), pages 129-142.
    5. José Azar & Ioana Marinescu & Marshall I. Steinbaum, 2017. "Labor Market Concentration," NBER Working Papers 24147, National Bureau of Economic Research, Inc.
    6. Andries Brandsma & d'Artis Kancs & Philippe Monfort & Alexandra Rillaers, 2015. "RHOMOLO: A dynamic spatial general equilibrium model for assessing the impact of cohesion policy," Papers in Regional Science, Wiley Blackwell, vol. 94, pages 197-221, November.
    7. Asma Hyder, 2007. "Preference for Public Sector Jobs and Wait Unemployment : A Micro Data Analysis," Labor Economics Working Papers 22196, East Asian Bureau of Economic Research.
    8. Reamonn Lydon, 1999. "Aspects of the Labour Market for New Graduates in Ireland - 1982-1997," The Economic and Social Review, Economic and Social Studies, vol. 30(3), pages 227-248.
    9. Torfs, Wouter & Zhao, Liqiu, 2015. "Everybody needs good neighbors? Labor mobility costs, cities and matching," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 39-54.

    More about this item

    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, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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