Large Plant Openings and Retail Prices

78 Pages Posted: 25 Sep 2023

See all articles by Abhishek Bhardwaj

Abhishek Bhardwaj

Tulane University

Devaki Ghose

World Bank

Saptarshi Mukherjee

Northeastern University

Manpreet Singh

Georgia Institute of Technology

Date Written: July 31, 2023


We show how the opening of a large plant affects local income inequality by focusing on a new mechanism: retail inflation. Using detailed barcode-level prices, we show that local retail prices increase in winning compared to runner-up counties after large plant openings. We develop a model of monopolistic retail firms with variable mark-ups and non-homothetic consumer preferences and show that consumers become less price-sensitive as they substitute shopping time for more working time in response to rising labor demand generated in the local economy after large plant entry. We show that local retail firms respond to less elastic consumer demand by raising their markups. Our reduced-form evidence shows that establishing a large plant entry only increases the wages and labor hours of certain high-skilled workers but it increases overall county-level prices, thus creating larger increases in income inequality in winning counties compared to runner-up counties. Our results highlight how a firm's location decision impacts local communities.

Keywords: Large Plant, Retail Inflation, Firm mark-ups, Spatial Inequality, Skilled and unskilled workers

JEL Classification: R11, O18, E31, J22

Suggested Citation

Bhardwaj, Abhishek and Ghose, Devaki and Mukherjee, Saptarshi and Singh, Manpreet, Large Plant Openings and Retail Prices (July 31, 2023). Available at SSRN: or

Abhishek Bhardwaj

Tulane University ( email )

6823 St Charles Ave
New Orleans, LA 70118
United States


Devaki Ghose

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Saptarshi Mukherjee

Northeastern University ( email )

360 Huntington Ave
409C Hayden Hall
Boston, MA Massachusetts 02115
United States
02115 (Fax)

Manpreet Singh (Contact Author)

Georgia Institute of Technology ( email )

800 W Peachtree St NW
Room 4162
Atlanta, GA 30308
United States
+14043855330 (Phone)


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