Multi-plant Origin of Zipf's Law

37 Pages Posted: 9 Jun 2022 Last revised: 8 Aug 2022

See all articles by Anindya S. Chakrabati

Anindya S. Chakrabati

Indian Institute of Management (IIM), Ahmedabad

Shekhar Tomar

Indian School of Business

Date Written: May 28, 2022

Abstract

Zipf's law is a well-known empirical regularity of firm size distribution. To date, it remains a puzzle as to what is the identity of the firms that causes this regularity. We document the multi-plant firm origin of Zipf's law - plants of multi-plant fi rms (exponent close to one) are more fat-tailed than single-plant firms indicating the dominance of the selection effect at the intensive margin. Extensive margin via aggregation of sales at the fi rm level plays a less crucial role than the selection effect. A model with modifi ed Gibrat's process can rationalize these findings. Finally, we empirically document that single-plant exporters have a thinner tail than multi-plant non-exporters, negating the role of export identity in explaining fat tails and Zipf's law, in particular.

Keywords: Zipf's law, multi-plant firms, selection effect

JEL Classification: L11, E23, C46, C15

Suggested Citation

Chakrabati, Anindya S. and Tomar, Shekhar, Multi-plant Origin of Zipf's Law (May 28, 2022). Indian School of Business WP, Available at SSRN: https://ssrn.com/abstract=4122246 or http://dx.doi.org/10.2139/ssrn.4122246

Anindya S. Chakrabati (Contact Author)

Indian Institute of Management (IIM), Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

Shekhar Tomar

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

HOME PAGE: http://shekhartomar.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
53
Abstract Views
267
Rank
559,913
PlumX Metrics