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Industry Differences in the Firm Size Distribution

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Abstract
This paper empirically examines industry determinants of the shape of Swedish firm size distributions at the 3-digit (NACE) industry level between 1999-2004 for surviving firms. Recent theoretical studies have begun to develop a better understanding of the causal mechanisms behind the shape of firm size distributions. At the same time there is a growing need for more systematic empirical research. This paper therefore presents a two-stage empirical model, in which the shape parameters of the size distribution are estimated in a first stage, with firm size measured as number of employees. In a second stage regression analysis, a number of hypotheses regarding economic variables that may determine the distributional shape are tested. The result from the first step are largely consistent with previous statistical findings confirming a power law. The main finding, however, is that increases in industry capital and financial constraint exert a considerable influence on the size distribution, shaping it over time towards thinner tails, and hence fewer large firms.

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  • Halvarsson, Daniel, 2013. "Industry Differences in the Firm Size Distribution," Ratio Working Papers 214, The Ratio Institute.
    • Handle: RePEc:hhs:ratioi:0214
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    More about this item

    Keywords

    Firm size distribution; Zipf's law; Gibrat's law;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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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