DP3045 On the Evolution of the Firm Size Distribution: Facts and Theory
|Author(s):||Luís M B Cabral, José Mata|
|Publication Date:||November 2001|
|Keyword(s):||financing constraints, firm growth, firm size distribution|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=3045|
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.