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Firm Size Distribution and Returns to Scale. Non-Parametric Frontier Estimates from Italian Manufacturing

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  • Lisa Crosato

    () (Università di Milano-Bicocca)

  • Sergio Destefanis

    () (University of Salerno, CELPE and CSEF)

  • Piero Ganugi

    () (Università Cattolica del Sacro Cuore, Piacenza)

Abstract

This paper explores the relationship between firm size distribution and technology. We analyse firm technology across selected manufacturing industries by means of a non-parametric production analysis, the Free Disposal Hull approach (Deprins et al., 1984; Kerstens and Vanden Eeckaut, 1999) and appraise the links between size and scale elasticity, finding a clear inverse relationship. Building on this result, we inquire whether the shape of the firm size distribution is related to a particular pattern of scale elasticities. We rely on the Zipf Plot (Stanley et al., 1995) of the Pareto IV distribution, which is concave up to a given threshold, and then approximately linear. Firms in the concave part of the plot are overwhelmingly found to experience increasing returns to scale. On the contrary, firms in the linear part are mainly characterised by constant returns to scale.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 228.

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Date of creation: 07 May 2009
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Handle: RePEc:sef:csefwp:228

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