The sources of scale: large employers in Britain in 1881

The article assesses the relative weight of different sources of workforce size, using both relative marginal effects and proportion of variance explained for the 545 largest British firms in 1881. Despite data uncertainties, integration is shown as the largest contributor to scale. Integration with mining had even larger effects, raising employment by 35%. Internal capital intensity reduced labour for the majority of firms by about 4 workers per £10,000 capital, but much more for tramways. Place-based externalities had greatest marginal effects for agglomerations (measured by population size). Generally, sectoral localisation was insignificant, but for small localities with more than one firm in a single sector, firm size increased 26–30% compared to diversified localities. Local monopsony (measured by workforce proportion of local population) explained a large proportion of variance because it occurred in a large number of small places. Of other variables explored, only legal form is of major importance.