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The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology

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  • POSCHKE, Markus

Abstract

How and why does the firm size distribution differ across countries? This paper documents that features of the firm size distribution are strongly associated with income per capita. Richer countries have fewer entrepreneurs and fewer small firms. The average, dispersion and skewness of firm size are all larger in richer countries. A simple general equilibrium model of occupational choice with skill-biased change in entrepreneurial technology calibrated to U.S. data can account very well for these patterns. The crucial assumption is that some entrepreneurs benefit more from technological progress than others. Marginal entrepreneurs then switch to becoming employees as technology advances.

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Bibliographic Info

Paper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 08-2011.

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Length: 39 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:mtl:montec:08-2011

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Keywords: Occupational choice; entrepreneurship; firm size; skill-biased technical change;

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Citations

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Cited by:
  1. Alain Gabler & Markus Poschke, 2013. "Experimentation by Firms, Distortions, and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 26-38, January.
  2. Larch, Mario & Norbäck, Pehr-Johan & Sirries, Steffen & Urban, Dieter, 2013. "Heterogeneous Firms, Globalization and the Distance Puzzle," Working Paper Series 957, Research Institute of Industrial Economics.
  3. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Optimal tariffs, retaliation, and the welfare loss from tariff wars in the Melitz model," Journal of International Economics, Elsevier, vol. 89(1), pages 13-25.
  4. Markus Poschke, 2012. "Who Becomes an Entrepreneur? Labor Market Prospects and Occupational Choice," Cahiers de recherche 13-2012, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  5. Manuel García-Santana, 2013. "Foreign Firms, Distribution of Income, and the Welfare of Developing Countries," 2013 Meeting Papers 1044, Society for Economic Dynamics.
  6. Poschke, Markus, 2013. "The Decision to Become an Entrepreneur and the Firm Size Distribution: A Unifying Framework for Policy Analysis," IZA Discussion Papers 7757, Institute for the Study of Labor (IZA).

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