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Discussion Paper Details

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

Author(s): Luís M B Cabral and José Mata

Publication Date: November 2001

Keyword(s): financing constraints, firm growth and firm size distribution

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Cabral, L and Mata, J. 2001. 'On the Evolution of the Firm Size Distribution: Facts and Theory'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3045