Working Paper: NBER ID: w10079
Authors: Thomas J. Holmes; Matthew F. Mitchell
Abstract: 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.
Keywords: No keywords provided
JEL Codes: F10; L20; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger plants (Q15) | More skilled workers (J24) |
| Market expansion (F69) | Larger plant size (D25) |
| Larger plant size (D25) | Ambiguous effects on skill premium (F66) |
| Larger plant size (D25) | Substitution of capital for unskilled labor (J24) |
| Larger plant size (D25) | Substitution of unskilled labor for skilled labor (F66) |
| Negative size-skill relationship (L25) | Downward trend in skill premium (F66) |
| Positive size-skill relationship (L25) | Upward trend in skill premium (J24) |