The Firm Size Distribution in a Small Open Economy: Theory and Evidence
AbstractWe construct a theoretical model of the dynamic processes (firm entry, growth, decline, and exit) that underpin the determination of a limiting firm size distribution (FSD). In particular, we model such dynamic processes using key structural parameters; sunk cost, exogenous entry constraints, and opportunity values of finite duration. The limiting FSD we derive, in steady state, turns out to be a combination of a Logarithmic and Zipf distribution. We estimate these structural parameters using long periods of Irish company data for defined cohorts of firms, in terms of trade orientation, within narrowly defined industries. Within non-exporting and exporting samples of companies our model fits the actual FSD well with a good return to the Zipf distribution in the upper tail, that is less dependent on the estimated structural parameters, and a good return at the lower tail, where the Logarithmic effects are endogenously driven by firm heterogeneity in estimated structural parameters.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Geary Institute, University College Dublin in its series Working Papers with number 200920.
Length: 43 pages
Date of creation: 13 Jul 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
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-28 (All new papers)
- NEP-BEC-2009-07-28 (Business Economics)
- NEP-ENT-2009-07-28 (Entrepreneurship)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francesca Lotti & Enrico Santarelli, 2001.
"Industry Dynamics and the Distribution of Firm Sizes: A Non-Parametric Approach,"
LEM Papers Series
2001/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Francesca Lotti & Enrico Santarelli, 2004. "Industry Dynamics and the Distribution of Firm Sizes: A Nonparametric Approach," Southern Economic Journal, Southern Economic Association, vol. 70(3), pages 443-466, January.
- F. Lotti & E. Santarelli, 2001. "Industry Dynamics and the Distiribution of Firm Sizes: A Non-Parametric Apporoach," Working Papers 406, Dipartimento Scienze Economiche, Universita' di Bologna.
- Melitz, Marc J, 2002.
"The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,"
CEPR Discussion Papers
3381, C.E.P.R. Discussion Papers.
- Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
- Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
- Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-52, September.
- Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
- Emin Dinlersoz & Glenn MacDonald, 2009.
"The Industry Life-Cycle of the Size Distribution of Firms,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 648-667, October.
- Glenn MacDonald & Emin Dinlersoz, 2005. "The Industry Life-Cycle of the Size Distribution of Firms," Working Papers 05-10, Center for Economic Studies, U.S. Census Bureau.
- Emin Dinlersoz & Glenn MacDonald, 2008. "Code files for "The Industry Life-Cycle of the Size Distribution of Firms"," Computer Codes 07-107, Review of Economic Dynamics.
- Erzo G.J. Luttmer, 2004. "The size distribution of firms in an economy with fixed and entry costs," Working Papers 633, Federal Reserve Bank of Minneapolis.
- Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
- Giulio Bottazzi & Angelo Secchi, 2005.
"Explaining the Distribution of Firms Growth Rates,"
LEM Papers Series
2005/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Gerrit de Wit, 2004.
"Firm Size Distributions : An overview of steady-state distributions resulting from firm dynamics models,"
Scales Research Reports
N200418, EIM Business and Policy Research.
- de Wit, Gerrit, 2005. "Firm size distributions: An overview of steady-state distributions resulting from firm dynamics models," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 423-450, June.
- Christopher A Laincz & Ana Sofia Domingues Rodrigues, . "A Theoretical Foundation for Understanding Firm Size Distributions and Gibrat's Law," Discussion Papers 05/34, Department of Economics, University of York.
- Steven Klepper & Peter Thompson, 2006.
"Submarkets and the evolution of market structure,"
RAND Journal of Economics,
RAND Corporation, vol. 37(4), pages 861-886, December.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
- Li, Qi & Walsh, Patrick Paul & Whelan, Ciara, 2007. "Jobless Growth through Creative Destruction: Ireland’s Industrial Development Path 1972–2003," IZA Discussion Papers 3211, Institute for the Study of Labor (IZA).
- Thorbj¯rn Knudsen, 2001. "Zipf's Law for Cities and Beyond: The Case of Denmark," American Journal of Economics and Sociology, Wiley Blackwell, vol. 60(1), pages 123-146, 01.
- Lu�s M B Cabral & Jos� Mata, 2003.
"On the Evolution of the Firm Size Distribution: Facts and Theory,"
American Economic Review,
American Economic Association, vol. 93(4), pages 1075-1090, September.
- Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
- Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989.
"The Growth and Failure of U.S. Manufacturing Plants,"
The Quarterly Journal of Economics,
MIT Press, vol. 104(4), pages 671-98, November.
- Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
- Kumar, M S, 1985. "Growth, Acquisition Activity and Firm Size: Evidence from the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 33(3), pages 327-38, March.
- Dunne, T. & Roberts, M.J., 1989. "Variation In Producer Turnover Across U.S. Manufacturing Industries," Papers 12-89-2, Pennsylvania State - Department of Economics.
- Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, vol. 70, pages 556.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Geary Tech).
If references are entirely missing, you can add them using this form.