NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An Alternative Theory of the Plant Size Distribution with an Application to Trade

Thomas J. Holmes, John J. Stevens

NBER Working Paper No. 15957
Issued in April 2010
NBER Program(s):   ITI   PR

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.

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Document Object Identifier (DOI): 10.3386/w15957

An Alternative Theory of the Plant Size Distribution, with Geography and Intra- and International Trade,” forthcoming Journal of Political Economy, with John J. Stevens

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