Industry Differences in the Firm Size Distribution
AbstractThis paper empirically examines industry determinants of the shape of Swedish firm size distributions at the 3-digit (NACE) industry level between 1999-2004 for surviving firms. Recent theoretical studies have begun to develop a better understanding of the causal mechanisms behind the shape of firm size distributions. At the same time there is a growing need for more systematic empirical research. This paper therefore presents a two-stage empirical model, in which the shape parameters of the size distribution are estimated in a first stage, with firm size measured as number of employees. In a second stage regression analysis, a number of hypotheses regarding economic variables that may determine the distributional shape are tested. The result from the first step are largely consistent with previous statistical findings confirming a power law. The main finding, however, is that increases in industry capital and financial constraint exert a considerable influence on the size distribution, shaping it over time towards thinner tails, and hence fewer large firms.
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Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 214.
Length: 38 pages
Date of creation: 21 Aug 2013
Date of revision:
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Firm size distribution; Zipf's law; Gibrat's law;
Find related papers by JEL classification:
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-31 (All new papers)
- NEP-BEC-2013-08-31 (Business Economics)
- NEP-COM-2013-08-31 (Industrial Competition)
- NEP-ENT-2013-08-31 (Entrepreneurship)
- NEP-IND-2013-08-31 (Industrial Organization)
- NEP-SBM-2013-08-31 (Small Business Management)
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