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An Alternative Theory of the Plant Size Distribution with an Application to 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 used by statistical agencies. Standard theories attribute all 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, including estimates of plant counts in the standardized and specialty segments by industry. The estimated model fits the data relatively well compared with estimates based on standard approaches. In particular, the predictions of the model for the impacts of a surge in imports from China are consistent with what happened to U.S. manufacturing industries that experienced such a surge over the period 1997--2007. Large-scale standardized plants were decimated, while small-scale specialty plants were relatively less impacted.

Suggested Citation

  • Thomas J. Holmes & John J. Stevens, 2010. "An Alternative Theory of the Plant Size Distribution with an Application to Trade," NBER Working Papers 15957, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15957
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    References listed on IDEAS

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    Cited by:

    1. Julien MARTIN & Florian MAYNERIS, 2013. "High-End Variety Exporters Defying Distance: Micro Facts and Macroeconomic Implications," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Nataraj, Shanthi, 2011. "The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors," Journal of International Economics, Elsevier, vol. 85(2), pages 292-301.
    3. Ali Hortacsu & Chad Syverson, 2009. "Why Do Firms Own Production Chains?," Working Papers 09-31, Center for Economic Studies, U.S. Census Bureau.
    4. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2017. "Spatial frictions," Journal of Urban Economics, Elsevier, vol. 97(C), pages 40-70.
    5. Thomas J. Holmes & John J. Stevens, 2010. "An alternative theory of the plant size distribution with an application to trade," Finance and Economics Discussion Series 2010-30, Board of Governors of the Federal Reserve System (U.S.).
    6. Ezra Oberfield & Devesh Raval, 2012. "Micro data and macro technology," Working Paper Series WP-2012-11, Federal Reserve Bank of Chicago.
    7. Julian di Giovanni & Andrei A. Levchenko, 2012. "Country Size, International Trade, and Aggregate Fluctuations in Granular Economies," Journal of Political Economy, University of Chicago Press, vol. 120(6), pages 1083-1132.
    8. A. Kerem Co?ar & Nezih Guner & James Tybout, 2016. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," American Economic Review, American Economic Association, vol. 106(3), pages 625-663, March.
    9. Holmes, Thomas J. & Stevens, John J., 2012. "Exports, borders, distance, and plant size," Journal of International Economics, Elsevier, vol. 88(1), pages 91-103.
    10. Martin, Julien & Mejean, Isabelle, 2014. "Low-wage country competition and the quality content of high-wage country exports," Journal of International Economics, Elsevier, vol. 93(1), pages 140-152.
    11. David H. Autor & David Dorn & Gordon H. Hanson & Jae Song, 2014. "Trade Adjustment: Worker-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 129(4), pages 1799-1860.
    12. Casaburi, Lorenzo & Minerva, G. Alfredo, 2011. "Production in advance versus production to order: The role of downstream spatial clustering and product differentiation," Journal of Urban Economics, Elsevier, vol. 70(1), pages 32-46, July.
    13. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 87-117.
    14. Álvarez, Roberto & Vergara, Sebastián, 2013. "Trade exposure, survival and growth of small and medium-size firms," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 185-201.
    15. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    16. Soderbery, Anson, 2014. "Market size, structure, and access: Trade with capacity constraints," European Economic Review, Elsevier, vol. 70(C), pages 276-298.
    17. Martin, Julien & Mayneris, Florian, 2015. "High-end variety exporters defying gravity: Micro facts and aggregate implications," Journal of International Economics, Elsevier, vol. 96(1), pages 55-71.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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