On Average Establishment Size across Sectors and Countriesy
Pedro Bento and
No 24968, NBER Working Papers from National Bureau of Economic Research, Inc
We construct a new dataset for the average employment size of establishments across sectors and countries from hundreds of sources. Establishments are larger in manufacturing than in services, and in each sector they are larger in richer countries. The cross-country income elasticity of establishment size is remarkably similar across sectors, about 0.3. We discuss these facts in light of several prominent theories of development such as entry costs and misallocation. We then quantify the sectoral and aggregate impact of entry costs and misallocation in an otherwise standard two-sector model with endogenous firm entry, firm-level productivity, and sectoral employment shares. We find that observed measures of misallocation account for the entire range of establishment-size differences across sectors and countries and almost 50 percent of the difference in non-agricultural GDP per capita between rich and poor countries.
JEL-codes: E02 E1 O1 O4 (search for similar items in EconPapers)
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Published as Bento, Pedro & Restuccia, Diego, 2021. "On average establishment size across sectors and countries," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 220-242.
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Journal Article: On average establishment size across sectors and countries (2021)
Working Paper: On Average Establishment Size across Sectors and Countries (2019)
Working Paper: On Average Establishment Size across Sectors and Countries (2018)
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