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Firm size and economic concentration: An analysis from lognormal expansion

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  • Lina Cortés
  • Juan M. Lozada
  • Javier Perote

Abstract

This paper studies the distribution of the firm size for the Colombian economy showing evidence against the Gibrat’s law, which assumes a stable lognormal distribution. On the contrary, we propose a lognormal expansion that captures deviations from the lognormal distribution with additional terms that allow a better fit at the upper distribution tail, which is overestimated according to the lognormal distribution. As a consequence, concentration indexes should be addressed consistently with the lognormal expansion. Through a dynamic panel data approach, we also show that firm growth is persistent and highly dependent on firm characteristics, including size, age, and leverage −these results neglect Gibrat’s law for the Colombian case.
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  • Lina Cortés & Juan M. Lozada & Javier Perote, 2020. "Firm size and economic concentration: An analysis from lognormal expansion," Documentos de Trabajo de Valor Público 18185, Universidad EAFIT.
  • Handle: RePEc:col:000122:018185
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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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