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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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    File URL: http://www.entrepreneurship-sme.eu/pdf-ez/N200418.pdf
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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. 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.
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    3. 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.
    4. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
    5. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
    6. 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.
    7. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
    8. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August.
    9. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
    10. 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.
    11. Reed, William J., 2001. "The Pareto, Zipf and other power laws," Economics Letters, Elsevier, vol. 74(1), pages 15-19, December.
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    Cited by:
    1. 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.
    2. Pedro Gil & Fernanda Figueiredo, 2013. "Firm size distribution under horizontal and vertical innovation," Journal of Evolutionary Economics, Springer, vol. 23(1), pages 129-161, January.
    3. Kox, Henk L.M. & van Leeuwen, George, 2013. "Market selection and scale inefficiency – A new methodology applied to EU business services," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 77-94.
    4. 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.
    5. Kitov, Ivan, 2009. "What is the best firm size to invest?," MPRA Paper 13721, University Library of Munich, Germany.
    6. Alex Coad, 2009. "Investigating the exponential age distribution of firms," Papers on Economics and Evolution 2009-23, Max Planck Institute of Economics, Evolutionary Economics Group.
    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. 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.
    9. Alex Coad & Werner Hölzl, 2010. "Firm Growth: Empirical Analysis," WIFO Working Papers 361, WIFO.
    10. 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.
    11. MArco Bee & Massimo Riccaboni & Stefano Schiavo, 2014. "Where Gibrat meets Zipf: Scale and Scope of French Firms," DEM Discussion Papers 2014/03, Department of Economics and Management.
    12. 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.
    13. Malevergne, Y. & Saichev, A. & Sornette, D., 2013. "Zipf's law and maximum sustainable growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1195-1212.
    14. Bryan Kelly & Hanno Lustig & Stijn Van Nieuwerburgh, 2013. "Firm Volatility in Granular Networks," NBER Working Papers 19466, National Bureau of Economic Research, Inc.
    15. Segarra, Agustí & Teruel, Mercedes, 2012. "An appraisal of firm size distribution: Does sample size matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 314-328.

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