Entrepreneurs, Managers, and the Firm Size Distribution

Yang Seung Lee

International Economic Journal, 2021, vol. 35, issue 3, 367-390

Abstract: Small firms can contribute to job creation and aggregate income. However, small firms are volatile and only a fraction of those can transition into larger firms, which create high-paying jobs. Entrepreneurs self-select for the transition. This study examines the pattern of entrepreneur self-selection. The main determinants of the self-selection are ability distribution of entrepreneurs and business environment, which represents skill distribution of laborers and social capital. This study predicts that firm-size distribution is truncated with the entrepreneur self-selection and aggregate income is larger when the business environment is better. This study contributes to the literature on firm-size distribution.

Date: 2021
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DOI: 10.1080/10168737.2021.1958896

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