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Where Gibrat meets Zipf: Scale and scope of French firms

Marco Bee, Massimo Riccaboni () and Stefano Schiavo

Physica A: Statistical Mechanics and its Applications, 2017, vol. 481, issue C, 265-275

Abstract: The proper characterization of the size distribution and growth of firms represents an important issue in economics and business. We use the Maximum Entropy approach to assess the plausibility of the assumption that firm size follows Lognormal or Pareto distributions, which underlies most recent works on the subject. A comprehensive dataset covering the universe of French firms allows us to draw two major conclusions. First, the Pareto hypothesis for the whole distribution should be rejected. Second, by discriminating across firms based on the number of products sold and markets served, we find that, within the class of multi-product companies active in multiple markets, the distribution converges to a Zipf’s law. Conversely, Lognormal distribution is a good benchmark for small single-product firms. The size distribution of firms largely depends on firms’ diversification patterns.

Keywords: Firm size distribution; Firm diversification; Pareto distribution; Zipf’s law; International trade (search for similar items in EconPapers)
JEL-codes: C46 L11 L25 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Where Gibrat meets Zipf: Scale and Scope of French Firms (2014) Downloads
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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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