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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://cep.lse.ac.uk/pubs/download/dp0773.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0773.

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Date of creation: Jan 2007
Handle: RePEc:cep:cepdps:dp0773
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

References listed on IDEAS
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  1. Rachel L. Ngai, 2007. "An R&D-based Model of Multi-sector Growth," 2007 Meeting Papers 349, Society for Economic Dynamics.
  2. Andrew Bernard & Stephen Redding & Peter Schott, 2009. "Multi-Product Firms and Trade Liberalization," Working Papers 09-21, Center for Economic Studies, U.S. Census Bureau.
  3. Ellison, G. & Glaeser, E.L., 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Working papers 94-27, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  5. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2008. "Spatial Wage Disparities: Sorting Matters!," Post-Print halshs-00754296, HAL.
  6. 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.
  7. International Monetary Fund, 2004. "Trade and Industrial Location with Heterogeneous Labor," IMF Working Papers 04/103, International Monetary Fund.
  8. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
  9. 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.
  10. Wheeler, Christopher H., 2006. "Productivity and the geographic concentration of industry: The role of plant scale," Regional Science and Urban Economics, Elsevier, vol. 36(3), pages 313-330, May.
  11. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers 151, Stanford - Studies in Industry Economics.
  12. Emin Dinlersoz, 2002. "Cities and the Organization of Manufacturing," Urban/Regional 0204003, EconWPA.
  13. 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.
  14. Thomas J. Holmes & John J. Stevens, 2002. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Finance and Economics Discussion Series 2002-17, Board of Governors of the Federal Reserve System (U.S.).
  15. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  16. 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.
  17. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
  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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