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Industry Dynamics and the Distribution of Firm Sizes: A Non-Parametric Approach

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  • Francesca Lotti
  • Enrico Santarelli

Abstract

The aim of this paper is to analyze the evolution of the size distribution of young firms within some selected industries, trying to assess the empirical implications of different models of industry dynamics: the model of passive learning (Jovanovic 1982), the model of active learning (Ericson and Pakes, 1995), and the evolutionary model (Audretsch, 1995). We use a non-parametric technique, the Kernel density estimator, applied to a data set from the Italian National Institute for Social Security (INPS), consisting in 12 cohorts of new manufacturing firms followed for 6 years. Since the patterns of convergence to the limit distribution are different between industries, we conclude that the model of passive learning is consistent with some of them, the active exploration model with others, the evolutionary model with all of them.

Suggested Citation

  • 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.
  • Handle: RePEc:ssa:lemwps:2001/14
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    References listed on IDEAS

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    1. Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, number 9780521355643, March.
    2. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2001. "Is It Really Wise to Design Policies in Support of New Firm Formation?," Rivista di Politica Economica, SIPI Spa, vol. 91(4), pages 151-170, April-May.
    3. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2001. "The relationship between size and growth: the case of Italian newborn firms," Applied Economics Letters, Taylor & Francis Journals, vol. 8(7), pages 451-454.
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    8. F. Lotti & E. Santarelli & M. Vivarelli, 1999. "Does Gibrat’s Law Hold in the Case of Young, Small Firms?," Working Papers 361, Dipartimento Scienze Economiche, Universita' di Bologna.
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    Keywords

    Cohorts; Gibrats Law; Kernel; Industry Dynamics; Non-parametric; Shakeouts.;

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