Firm Size Distribution and Returns to Scale. Non-Parametric Frontier Estimates from Italian Manufacturing
AbstractThis 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 InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 228.
Date of creation: 07 May 2009
Date of revision:
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L6 - Industrial Organization - - Industry Studies: Manufacturing
- D20 - Microeconomics - - Production and Organizations - - - General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-BEC-2009-06-03 (Business Economics)
- NEP-EFF-2009-06-03 (Efficiency & Productivity)
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