Plants in Space

Ezra Oberfield, Esteban Rossi-Hansberg, Nicholas Trachter and Pierre Daniel Sarte

No 1507, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies how the sorting of firms across space can amplify ex-ante differences in local conditions and how differences in economic activity across space can increase variation in firm-level outcomes. We construct a model in which heterogeneous firms produce in multiple locations to minimize the cost of transporting their goods to customers, limited by firms' spans of control and plants' cannibalization of each other's demand. The rent schedule induces higher productivity firms to place their plants in locations that tend to have higher effective demand. We document that even among plants in the same firms, size and placement vary systematically with local economic conditions. Further, we document that larger firms (as measured by national employment) tend to place their plants in more dense locations.

Date: 2019
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Related works:
Journal Article: Plants in Space (2024)
Working Paper: Plants in Space (2020)
Working Paper: Plants in Space (2020)
Working Paper: Plants in Space (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1507

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