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

Cabral, Luis M. B.; Mata, José

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

35 Pages Posted: 27 Nov 2001

See all articles by Luis M. B. Cabral

Luis M. B. Cabral

New York University (NYU) - Leonard N. Stern School of Business - Department of Economics; Centre for Economic Policy Research (CEPR)

José Mata

Nova School of Business and Economics

Date Written: November 2001

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.

Keywords: Firm growth, financing constraints, firm size distribution

JEL Classification: L00

Suggested Citation: Suggested Citation

Cabral, Luis M. B. and Mata, José, On the Evolution of the Firm Size Distribution: Facts and Theory (November 2001). Available at SSRN: https://ssrn.com/abstract=292129