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

Luis M B Cabral () and José Mata ()

No 3045, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: financing constraints; firm growth; firm size distribution (search for similar items in EconPapers)
JEL-codes: L00 (search for similar items in EconPapers)
Date: 2001-11
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