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

2003; American Economic Association; Volume: 93; Issue: 4 Linguagem: Inglês

10.1257/000282803769206205

1944-7981

Luı́s Cabral, José Mata,

Entrepreneurship Studies and Influences

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 lognormal distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraints. A calibrated version of our model does a good job at explaining the evolution of the firm size distribution.