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An Alternative Theory of the Plant Size Distribution, with Geography and Intra- and International Trade

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  • Thomas J. Holmes
  • John J. Stevens

Abstract

There is wide variation in the sizes of manufacturing plants, even within the most narrowly defined industry classifications. Standard theories attribute such size differences to productivity differences. This paper develops an alternative theory in which industries are made up of large plants producing standardized goods and small plants making custom or specialty goods. It uses confidential census data to estimate the parameters of the model. The model fits the data well. In particular, the predictions of the model regarding the effect of a surge of imports from China are consistent with what happened over the period 1997-2007.

Suggested Citation

  • Thomas J. Holmes & John J. Stevens, 2014. "An Alternative Theory of the Plant Size Distribution, with Geography and Intra- and International Trade," Journal of Political Economy, University of Chicago Press, vol. 122(2), pages 369-421.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/674633
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    File URL: http://dx.doi.org/10.1086/674633
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    1. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
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