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Job Creation and the Intra-Distribution Dynamics of the Firm Size Distribution

WIFO Working Paper No. 395/2011

34 Pages Posted: 1 Jul 2011  

Peter Huber

Austrian Institute of Economic Research (WIFO)

Michael Pfaffermayr

University of Innsbruck - Department of Economics; Austrian Institute of Economic Research

Harald Oberhofer

Vienna University of Economics and Business - Department of Economics; Austrian Institute of Economic Research (WIFO)

Date Written: May 2011

Abstract

Based on a structural model for initial firm size, survival and firm growth we estimate firm-specific transition probabilities between size classes of the firm size distribution. This allows an assessment of the impact of different (counterfactual) economic policy measures on intra-distribution dynamics of the firm size distribution. We find that policies increasing the life span of firms reduce the exit hazard of young firms, but also reduce the probability to be a Gazelle. An increase in the industry-wide entry rate increases the exit hazards of incumbent firms and has no strong impact on the likelihood of firms to become Gazelles. Increasing market growth, by contrast, decreases the exit hazards for incumbent firms and slightly increases the likelihood of firms to be Gazelles. Finally, an increase in the birth size of firms increases the probability of young firms to be Gazelles with strongest effects for the smallest firms.

Keywords: Firm growth, survival, entry size, Gazelles, economic policy, sample selection

JEL Classification: C24, D22, L11, L25, L26, M13

Suggested Citation

Huber, Peter and Pfaffermayr, Michael and Oberhofer, Harald, Job Creation and the Intra-Distribution Dynamics of the Firm Size Distribution (May 2011). WIFO Working Paper No. 395/2011. Available at SSRN: https://ssrn.com/abstract=1876530 or http://dx.doi.org/10.2139/ssrn.1876530

Peter Huber (Contact Author)

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Michael Pfaffermayr

University of Innsbruck - Department of Economics ( email )

Universitaetsstrasse 15
A-6020, Innsbruck
Austria
+43 512 507 7359 (Phone)

HOME PAGE: http://homepage.uibk.ac.at/~c43236/

Austrian Institute of Economic Research ( email )

P.O. Box 91
Wien, A-1103
Austria
+43 1 798 26 01-253 (Phone)
+43 1 798 93 86 (Fax)

HOME PAGE: http://www.wifo.ac.at/Michael.Pfaffermayr/

Harald Oberhofer

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
A-1020 Vienna
Austria

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

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