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On the Evolution of the Firm Size Distribution: Facts and Theory

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  • Cabral, Luís M B
  • Mata, José

Abstract

Using a comprehensive data set of Portuguese manufacturing firms, we show that the firm size distribution is significantly right-skewed, evolving over time toward a log-normal distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraint. A calibrated version of our model does a good job at explaining the evolution of the firm size distribution.

Suggested Citation

  • 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.
  • Handle: RePEc:cpr:ceprdp:3045
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    References listed on IDEAS

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    1. Rui Albuquerque & Hugo A. Hopenhayn, 2004. "Optimal Lending Contracts and Firm Dynamics," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 285-315.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financing constraints; firm growth; firm size distribution;
    All these keywords.

    JEL classification:

    • L00 - Industrial Organization - - General - - - General

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