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DP3045
On the Evolution of the Firm Size Distribution: Facts and Theory
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Publication Date:
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November 2001
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Link to this Page:
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www.cepr.org/pubs/dps/DP3045.asp
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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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