This article develops a theory of how capital, skilled labor, and unskilled labor interact at the plant level. The theory has implications for the relationship between factor allocation and plant size and the effects of trade and growth on the skill premium. The theory is consistent with certain...

To what extent will an industry in which mergers are feasible tend toward monopoly? We analyze this question using a dynamic dominant-firm model with rational agents, endogenous mergers, and constant returns to scale production. We find that long-run industry concentration depends upon the...