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

Listed author(s):
  • 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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References listed on IDEAS
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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. 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.
  3. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  4. Amiti, Mary & Pissarides, Christopher A., 2005. "Trade and industrial location with heterogeneous labor," Journal of International Economics, Elsevier, vol. 67(2), pages 392-412, December.
  5. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  6. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
  7. Thomas J. Holmes, 2005. "The Location of Sales Offices and the Attraction of Cities," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 551-581, June.
  8. Antonio Ciccone & Robert E. Hall, 1993. "Productivity and the Density of Economic Activity," NBER Working Papers 4313, National Bureau of Economic Research, Inc.
  9. Christopher H. Wheeler, 2004. "Productivity and the geographic concentration of industry: the role of plant scale," Working Papers 2004-024, Federal Reserve Bank of St. Louis.
  10. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2008. "Spatial Wage Disparities: Sorting Matters!," Post-Print halshs-00754296, HAL.
  11. Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, November.
  12. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  13. Emin Dinlersoz, 2002. "Cities and the Organization of Manufacturing," Urban/Regional 0204003, EconWPA.
  14. Thomas J. Holmes & John J. Stevens, 2004. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Journal of Economic Geography, Oxford University Press, vol. 4(3), pages 227-250, June.
  15. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  16. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers 151, Stanford - Studies in Industry Economics.
  17. Rachel L. Ngai, 2007. "An R&D-based Model of Multi-sector Growth," 2007 Meeting Papers 349, Society for Economic Dynamics.
  18. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
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