Multi-plant Firms and the Heavy Tail of Firm Size Distribution

32 Pages Posted: 9 Jun 2022 Last revised: 29 Feb 2024

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

The right tail of the firm size distribution has a heavy tail. The origin of this phenomenon, especially the specific characteristics of firms driving this pattern, remain a subject of extensive debate. Previous work has shown that plant size distribution has thinner tails than firm size distribution, indicating the role of multi-plant firms. However, we do not know whether this phenomenon is simply a mechanical effect arising from aggregation across multiple plants or whether the plants of multi-plant firms are different from those of single-plant firms. Using novel data with plant-to-firm mapping, we document that plants of multi-plant firms (exponent close to one) are more heavy-tailed than single-plant firms, indicating the dominance of the selection effect at the intensive margin. Extensive margin via aggregation of sales at the firm level plays a less crucial role than the selection effect. Importantly, single-plant exporters have a thinner tail than multi-plant non-exporters, suggesting a more dominant role of multi-plant identity than export identity in explaining heavy tails.

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 Firms and the Heavy Tail of Firm Size Distribution (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
132
Abstract Views
616
Rank
402,034
PlumX Metrics