The Plant Size-Place Effect: Agglomeration and Monopsony in Labour Markets

Author
Keywords
Abstract

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.

Year of Publication
2008
Number
539
Date Published
12/2008
Publication Language
eng
Citation Key
8010
URL
Working Papers