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Distribution and Fluctuation of Firm Size in the Long-Run

Author

Listed:
  • W. Souma
  • H. Aoyama
  • L. Gruene

Abstract

The paper studies empirically and analytically growth and fluctuation of firm size distribution. An empirical analysis is carried out on several data sets on firm size, with emphasis on one-time distribution as well as growth-rate probability distribution. Two well-known scaling laws, Pareto's law and Gibrat's law, are discussed. Some theoretical discussion on their relationship is presented. We also discuss to what extent there may exist economic mechanisms that produce an unequal firm size distribution in the long run. The mechanisms we study have been known in the economic literature since long. Yet, they have not been studied in the context of a dynamic decision problem of the firm. We allow for heterogeneity of firms with respect to certain characteristics. We then show that there are mechanisms at work which may generate a twin-peaked distribution of firm size in the long-run, which will then be tested empirically

Suggested Citation

  • W. Souma & H. Aoyama & L. Gruene, 2004. "Distribution and Fluctuation of Firm Size in the Long-Run," Computing in Economics and Finance 2004 92, Society for Computational Economics.
    • Handle: RePEc:sce:scecf4:92
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    More about this item

    Keywords

    Firm size; Pareto's law; Gibrat's law;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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