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Firm Size Distribution and Growth

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Author Info

  • Patrizio Pagano

    ()
    (Bank of Italy, Economic Research Department)

  • Fabiano Schivardi

    ()
    (Bank of Italy, Economic Research Department)

Abstract

We empirically characterize the sectoral distribution of firm size for a set of European countries, finding substantial differences. We then study the relationship between productivity growth at the sectoral level and size structure. We find a positive and robust association between average firm size and growth. Asking why size should matter for growth, we consider the role of innovative activity, to construct a test based on the differential effect of size on growth according to various indicators of R&D intensity at the sectoral level. Our results indicate that larger size fosters productivity growth because it allows firms to take advantage of all the increasing returns associated with R&D. We finally argue that our test can be interpreted as a test of reverse causality, which lends support to the view of firm size having a causal impact on growth.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 394.

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Date of creation: Feb 2001
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Handle: RePEc:bdi:wptemi:td_394_01

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Keywords: firm size; growth; R&D.;

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  15. Peretto, Pietro F., 1997. "Technological Change, Market Rivalry, and the Evolution of theCapitalist Engine of Growth," Working Papers 97-06, Duke University, Department of Economics.
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