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

Luis Cabral and José Mata

American Economic Review, 2003, vol. 93, issue 4, 1075-1090

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 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. (JEL L11)

Date: 2003
Note: DOI: 10.1257/000282803769206205
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