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Stability and Turbulence in the Size Distribution of Firms: Evidence from Dutch Manufacturing

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  • Orietta Marsili

Abstract

This paper examines the shape of the firm size distribution over time and across sectors, using a longitudinal data set of manufacturing firms in the Netherlands in 1978-1998. Although the size distribution is highly skewed and resembles the Pareto law, a variety of patterns emerge across sectors, with the lognormal providing a better fit in some sectors. The size distribution and the underlying firm dynamics evolve over time. In the long term, the distribution has become less skewed and thinner at the tails, the slope of the Pareto law has declined, and mobility of firms at the lower tail has increased. In addition, the slope of the Pareto law tends to become steeper in correspondence with an economic recession, with peaks of mobility of firms at different size classes.

Suggested Citation

  • Orietta Marsili, 2006. "Stability and Turbulence in the Size Distribution of Firms: Evidence from Dutch Manufacturing," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(2), pages 255-272.
    • Handle: RePEc:taf:irapec:v:20:y:2006:i:2:p:255-272
    DOI: 10.1080/02692170600581193
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    References listed on IDEAS

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    1. Toke Reichstein & Morten Berg Jensen, 2003. "Analyzing the Distributions of the Stochastic Firm Growth Approach," DRUID Working Papers 03-12, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    2. Elena Cefis & Giuseppe Espa, 1998. "Assessing Accuracy in Transition Probability Matrices," Department of Economics Working Papers 9801, Department of Economics, University of Trento, Italia.
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    Cited by:

    1. Lina Cortés & Juan M. Lozada & Javier Perote, 2019. "Firm size and concentration inequality: A flexible extension of Gibrat’s law," Documentos de Trabajo de Valor Público 17205, Universidad EAFIT.
    2. Cortés, Lina M. & Mora-Valencia, Andrés & Perote, Javier, 2017. "Measuring firm size distribution with semi-nonparametric densities," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 485(C), pages 35-47.
    3. Giuseppe Moscarini & Fabien Postel-Vinay, 2009. "Large Employers Are More Cyclically Sensitive," NBER Working Papers 14740, National Bureau of Economic Research, Inc.
    4. Lina M Cortés & Juan M Lozada & Javier Perote, 2021. "Firm size and economic concentration: An analysis from a lognormal expansion," PLOS ONE, Public Library of Science, vol. 16(7), pages 1-21, July.
    5. Qi Li & Patrick Paul Walsh, 2009. "The Firm Size Distribution in a Small Open Economy: Theory and Evidence," Working Papers 200920, Geary Institute, University College Dublin.
    6. Junho Na & Jeong-dong Lee & Chulwoo Baek, 2017. "Is the service sector different in size heterogeneity?," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(1), pages 95-120, April.

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