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Firm Size Distributions : An overview of steady-state distributions resulting from firm dynamics models

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  • Gerrit de Wit
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    Abstract

    Empirical firm size distributions are the cumulated result of underlying firm dynamics involving entry of new firms and growth, decline, and exits of incumbent firms. In this improved version of the research�report "Firm size distributions" (H200306), we give an overview of firm size distributions that result as steady states from models differing in the way these firm dynamics are modelled. In the process we (i) derive common results and explain seemingly contradictory results, (ii) propose new functional forms to describe firm size distributions, (iii) give insight in the interrelationships between the distributions in terms of underlying firm dynamics, (iv) give possible firm dynamical interpretations of the parameters of the distributions, and (v) analyse to which extent the steadystate approach is able to explain the shape of firm size distributions that are encountered in practice.

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    Bibliographic Info

    Paper provided by EIM Business and Policy Research in its series Scales Research Reports with number N200418.

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    Length: 27 pages
    Date of creation: 29 Dec 2004
    Date of revision:
    Handle: RePEc:eim:papers:n200418

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    1. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
    2. Evans, David S., 1986. "The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Working Papers 86-33, C.V. Starr Center for Applied Economics, New York University.
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    4. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
    5. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
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    7. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
    8. Stanley, Michael H. R. & Buldyrev, Sergey V. & Havlin, Shlomo & Mantegna, Rosario N. & Salinger, Michael A. & Eugene Stanley, H., 1995. "Zipf plots and the size distribution of firms," Economics Letters, Elsevier, vol. 49(4), pages 453-457, October.
    9. Bronwyn H. Hall, 1988. "The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector," NBER Working Papers 1965, National Bureau of Economic Research, Inc.
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    11. Blank, Aharon & Solomon, Sorin, 2000. "Power laws in cities population, financial markets and internet sites (scaling in systems with a variable number of components)," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 279-288.
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    Cited by:
    1. Y. Malevergne & A. Saichev & D. Sornette, 2010. "Zipf's law and maximum sustainable growth," Papers 1012.0199, arXiv.org.
    2. Erlingsson, Einar Jón & Alfarano, Simone & Raberto, Marco & Stefánsson, Hlynur, 2012. "On the distributional properties of size, pro fit and growth of Icelandic firms," MPRA Paper 35857, University Library of Munich, Germany.
    3. Coad, Alex, 2010. "Investigating the exponential age distribution of firms," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(17), pages 1-30.
    4. Ivan O. Kitov, 2009. "What is the best firm size to invest?," Papers 0903.0286, arXiv.org.
    5. Growiec, Jakub & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2008. "On the size distribution of business firms," Economics Letters, Elsevier, vol. 98(2), pages 207-212, February.
    6. Alex Coad & Werner Hölzl, 2010. "Firm Growth: Empirical Analysis," WIFO Working Papers 361, WIFO.
    7. Jakub Growiec & Fabio Pammolli & Massimo Riccaboni, 2011. "Innovation and Corporate Dynamics: A Theoretical Framework," DISA Working Papers 2011/08, Department of Computer and Management Sciences, University of Trento, Italy, revised 29 Jul 2011.
    8. Pedro Mazeda Gil & Fernanda Figueiredo, 2011. "Firm Size Distribution under Horizontal and Vertical Innovation," DEGIT Conference Papers c016_065, DEGIT, Dynamics, Economic Growth, and International Trade.
    9. Qi Li & Patrick Paul Walsh, 2009. "The Firm Size Distribution in a Small Open Economy: Theory and Evidence," Working Papers 200920, Geary Institute, University College Dublin.
    10. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, vol. 38(5), pages 693-705, May.

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