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Diversity of firm sizes, complexity, and industry structure in the Chinese economy

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  • Heinrich, Torsten
  • Dai, Shuanping

Abstract

Among the phenomena in economics that are not yet well-understood is the fat-tailed (power-law) distribution of firm sizes in the world´s economies. Different mechanisms suggested in the literature to explain this distribution of firm sizes are discussed in the present paper. The paper uses the China Industrial Enterprises Database to study the distribution (firm size in terms of the number of employees, capital, and gross profit) for the provinces of China for the years 1998-2008. We estimate the power-law distribution and confirm its plausibility using the KS test and the log-likelihood ratio vs. lognormal and exponential distributions. The analysis on regional levels allows an assessment of regional effects on differences in the distribution; we discuss possible explanations for the observed patterns in the light of the recent regional economic development in the PRC.

Suggested Citation

  • Heinrich, Torsten & Dai, Shuanping, 2015. "Diversity of firm sizes, complexity, and industry structure in the Chinese economy," Working Papers on East Asian Studies 107/2015, University of Duisburg-Essen, Institute of East Asian Studies IN-EAST.
  • Handle: RePEc:zbw:udedao:1072015
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    Citations

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    Cited by:

    1. Lina Cortés & Juan M. Lozada & Javier Perote, 2019. "Firm size and concentration inequality: A flexible extension of Gibrat’s law," Documentos de Trabajo CIEF 017205, Universidad EAFIT.
    2. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Growth, development, and structural change at the firmlevel: The example of the PR China," Chemnitz Economic Papers 040, Department of Economics, Chemnitz University of Technology.
    3. Cortés, Lina M. & Mora-Valencia, Andrés & Perote, Javier, 2017. "Measuring firm size distribution with semi-nonparametric densities," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 485(C), pages 35-47.
    4. Montebruno, Piero & Bennett, Robert J. & van Lieshout, Carry & Smith, Harry, 2019. "A tale of two tails: Do Power Law and Lognormal models fit firm-size distributions in the mid-Victorian era?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 858-875.
    5. Heinrich, Torsten, 2016. "The Narrow and the Broad Approach to Evolutionary Modeling in Economics," MPRA Paper 75797, University Library of Munich, Germany.
    6. Lina Cortés & Juan M. Lozada & Javier Perote, 2020. "Firm size and economic concentration: An analysis from lognormal expansion," Documentos de Trabajo CIEF 018185, Universidad EAFIT.
    7. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Growth, development, and structural change at the firm-level: The example of the PR China," Papers 2012.14503, arXiv.org.
    8. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Levels of structural change: An analysis of China's development push 1998-2014," Papers 2005.01882, arXiv.org, revised Sep 2020.
    9. Heinrich, Torsten & Yang, Jangho & Dai, Shuanping, 2020. "Growth, development, and structural change at the firm-level: The example of the PR China," MPRA Paper 105011, University Library of Munich, Germany.

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    More about this item

    Keywords

    firm size distribution; evolutionary industry dynamics; power-law distribution; China;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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