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Industry Dynamics and the Distiribution of Firm Sizes: A Non-Parametric Apporoach

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  • F. Lotti
  • E. Santarelli

Abstract

The aim of this paper is to analyze the evolution of the size distribution of young firms within some selected industries, trying to assess the empirical implications of different models of industry dynamics: the model of passive learning (Jovanovic 1982), the model of active learning (Ericson and Pakes, 1995), and the evolutionary model (Audretsch, 1995). We use a non-parametric technique, the Kernel density estimator, applied to a data set from the Italian National Institute for Social Security (INPS), consisting in 12 cohorts of new manufacturing firms followed for 6 years. Since the patterns of convergence to the limit distribution are different between industries, we conclude that the model of passive learning is consistent with some of them, the active exploration model with others, the evolutionary model with all of them.

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Bibliographic Info

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 406.

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Date of creation: 2001
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Handle: RePEc:bol:bodewp:406

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  1. L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
  2. F. Lotti & E. Santarelli & M. Vivarelli, 1999. "Does Gibrat’s Law Hold in the Case of Young, Small Firms?," Working Papers 361, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
  4. Peter Hart & Nicholas Oulton, 1999. "Gibrat, Galton and Job Generation," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 6(2), pages 149-164.
  5. Klepper, Steven & Miller, John H., 1995. "Entry, exit, and shakeouts in the United States in new manufactured products," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 567-591, December.
  6. Boeri, Tito & Bellmann, Lutz, 1995. "Post-entry behaviour and the cycle: Evidence from Germany," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 483-500, December.
  7. Ijiri, Yuji & Simon, Herbert A, 1974. "Interpretations of Departures from the Pareto Curve Firm-Size Distributions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(2), pages 315-31, Part I, M.
  8. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  9. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262011468, December.
  10. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, Elsevier, vol. 79(1), pages 1-45, March.
  11. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3045, C.E.P.R. Discussion Papers.
  12. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2001. "The relationship between size and growth: the case of Italian newborn firms," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(7), pages 451-454.
  13. Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 556.
  14. Cabral, Luís M B, 1997. "Entry Mistakes," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1729, C.E.P.R. Discussion Papers.
  15. Jose A. F. Machado & Jose Mata, 2000. "Box-Cox quantile regression and the distribution of firm sizes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(3), pages 253-274.
  16. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
  17. Audretsch, David B. & Santarelli, Enrico & Vivarelli, Marco, 1999. "Start-up size and industrial dynamics: some evidence from Italian manufacturing," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 17(7), pages 965-983, October.
  18. Brock, W A, 1999. "Scaling in Economics: A Reader's Guide," Industrial and Corporate Change, Oxford University Press, vol. 8(3), pages 409-46, September.
  19. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2001. "Is It Really Wise to Design Policies in Support of New Firm Formation?," Rivista di Politica Economica, SIPI Spa, SIPI Spa, vol. 91(4), pages 151-170, April-May.
  20. Geroski, Paul A, 1999. "The Growth of Firms in Theory and in Practice," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2092, C.E.P.R. Discussion Papers.
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