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

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  1. 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.
  2. Stephen J Redding & Peter K Schott & Andrew B Bernard, 2007. "Multi-product Firms and Trade Liberalization," 2007 Meeting Papers 44, Society for Economic Dynamics.
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