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Human capital and average firm size

Author

Listed:
  • Bi, Qingmiao
  • Hang, Jing
  • Zhou, Mohan

Abstract

This note embeds an O-ring production function of Kremer (1993) into the standard Lucas (1978) model of firm size distribution. We show that an increase in the stock of human capital can raise average firm size. Empirical evidence confirms this finding. These findings help explain the positive relationship between average firm size and development documented in the recent literature.

Suggested Citation

  • Bi, Qingmiao & Hang, Jing & Zhou, Mohan, 2021. "Human capital and average firm size," Economics Letters, Elsevier, vol. 204(C).
    • Handle: RePEc:eee:ecolet:v:204:y:2021:i:c:s016517652100197x
    DOI: 10.1016/j.econlet.2021.109920
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    References listed on IDEAS

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    More about this item

    Keywords

    Human capital; O-ring production; Average firm size;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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