 The Origins of Firm Heterogeneity: A Production Network ApproachKalina Manova, Glenn Magerman (), Emmanuel Dhyne, Andreas Moxnes and Andrew Bernard No 487, 2017 Meeting Papers from Society for Economic Dynamics Abstract: This paper evaluates the firm size distribution and firm growth in the presence of production networks. Firms can be large because they attract (i) more suppliers and customers, (ii) larger or better suppliers and customers and (iii) find better matches along these supplier-buyer relationships. In a simple model of monopolistic competition, firms sell to other firms as well as to final demand. The model presents a decomposition of firm sizes into various structural components along supplier, buyer and match characteristics. Using unique data on supplier-buyer relationships across the universe of firms covering all economic activities in Belgium, we present three key results. First, the production network explains all of the variance of the size distribution relative to sales to final demand. Second, inter-firm demand vastly dominates the traditional productivity channel on the supply side. Third, on both the demand and supply side, the extensive margin dominates the intensive margin. In other words: firms are big because they have many rather than important customers/suppliers. Date: 2017 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:487 Access Statistics for this paper More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC. |
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