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A theory of factor allocation and plant size

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  • Thomas J. Holmes
  • Matthew F. Mitchell

Abstract

This article develops a theory of how capital, skilled labor, and unskilled labor interact at the plant level. The theory has implications for the relationship between factor allocation and plant size and the effects of trade and growth on the skill premium. The theory is consistent with certain facts about factor allocation and factor price changes in the 19th and 20th centuries.

Suggested Citation

  • Thomas J. Holmes & Matthew F. Mitchell, 2008. "A theory of factor allocation and plant size," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 329-351, June.
    • Handle: RePEc:bla:randje:v:39:y:2008:i:2:p:329-351
    DOI: 10.1111/j.0741-6261.2008.00017.x
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    1. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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    Cited by:

    1. Graetz, Georg & Feng, Andy, 2014. "Rise of the Machines: The Effects of Labor-Saving Innovations on Jobs and Wages," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100401, Verein für Socialpolitik / German Economic Association.
    2. Kurokawa, Yoshinori, 2010. "Fixed cost, number of firms, and skill premium: An alternative source for rising wage inequality," Economics Letters, Elsevier, vol. 108(2), pages 141-144, August.
    3. Ana Cardoso & Shoshana Neuman & Adrian Ziderman, 2010. "Wage Mobility in Israel: The Effect of Sectoral Concentration," Journal of Labor Research, Springer, vol. 31(2), pages 146-161, June.
    4. Stijepic, Damir, 2013. "Successive Technical Change and the Demand for Skill," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79870, Verein für Socialpolitik / German Economic Association.
    5. Yoshinori Kurokawa, 2014. "A Simple Model of Competition Policies, Trade, and the Skill Premium," Tsukuba Economics Working Papers 2014-002, Faculty of Humanities and Social Sciences, University of Tsukuba, revised Apr 2020.
    6. Jose Asturias & Jack Rossbach, 2023. "Grouped Variation In Factor Shares: An Application To Misallocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 325-360, February.
    7. Richard Walker, 2005. "Superstars and Renaissance Men: Specialization, Market Size and the Income Distribution," CEP Discussion Papers dp0707, Centre for Economic Performance, LSE.
    8. Gavilan, Angel, 2012. "Wage inequality, segregation by skill and the price of capital in an assignment model," European Economic Review, Elsevier, vol. 56(1), pages 116-137.
    9. Shintaku, Koji, 2015. "Export Decision, the Division of Labor, and Skill Intensity," MPRA Paper 64654, University Library of Munich, Germany, revised 25 May 2015.
    10. Thomas Holmes, 2004. "EconomicDynamics Interviews Thomas Holmes on Dynamic Economic Geography," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 6(1), November.
    11. Damir Stijepic, 2017. "Globalization, Worker Mobility and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 108-131, February.
    12. Yang, Zhenbing & Shi, Qingquan & Shao, Shuai & Lu, Minwei & Yang, Lili, 2023. "Stricter energy regulations and water consumption: Firm-level evidence from China," Energy Economics, Elsevier, vol. 120(C).
    13. Walker, Richard, 2005. "Superstars and renaissance men: specialization, market size and the income distribution," LSE Research Online Documents on Economics 19880, London School of Economics and Political Science, LSE Library.
    14. Damir Stijepic, 2016. "Small Employers, Large Employers and the Skill Premium," Economics Bulletin, AccessEcon, vol. 36(1), pages 381-387.
    15. repec:pri:cepsud:113krusell is not listed on IDEAS
    16. Rusanovskiy, Viktor (Русановский, Виктор) & Markov, Vladimir (Марков, Владимир) & Brovkova, Anna (Бровкова, Анна), 2018. "Modeling the Effects of Spatial Localization in Urban Agglomerations of Russia [Моделирование Эффекта Пространственной Локализации В Городских Агломерациях России]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, December.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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