A Theory of Factor Allocation and Plant Size
Thomas J. Holmes, Matthew F. Mitchell
NBER Working Paper No. 10079
In this paper we develop a theory of how factors interact at the plant level. The theory has implications for: (1) the micro foundations for capital skill complementarity (2) the relationship between factor allocation and plant size and (3) 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.
Published: 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.