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Multi‐plant firms and the heavy tail of firm size distribution

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  • Anindya S. Chakrabarti
  • Shekhar Tomar

Abstract

The right tail of the firm size distribution has a heavy tail. The origin of this phenomenon, especially the specific characteristics of firms driving this pattern, remain a subject of extensive debate. Previous work has shown that plant size distribution has thinner tails than firm size distribution, indicating the role of multi‐plant firms. However, we do not know whether this phenomenon is simply a mechanical effect arising from aggregation across multiple plants or whether the plants of multi‐plant firms are different from those of single‐plant firms. Using novel data with plant‐to‐firm mapping, we document that plants of multi‐plant firms are more heavy‐tailed than single‐plant firms, indicating the dominance of the selection effect at the intensive margin. Extensive margin via aggregation of sales at the firm level plays a less crucial role than the selection effect. Importantly, single‐plant exporters have a thinner tail than multi‐plant non‐exporters, suggesting a more dominant role of multi‐plant identity than export identity in explaining heavy tails. Entreprises à établissements multiples et distribution à queue lourde de la taille des entreprises. La queue de droite de la distribution de la taille des entreprises est lourde. L'origine de ce phénomène, surtout les caractéristiques particulières des entreprises responsables de cette tendance, fait encore l'objet de maints débats. Des travaux antérieurs ont démontré que la distribution de la taille des établissements a des queues moins lourdes que la distribution de la taille des entreprises, indiquant le rôle des entreprises à établissements multiples. Toutefois, nous ne savons pas si ce phénomène est simplement un effet mécanique découlant du regroupement de plusieurs établissements ou si les établissements des entreprises multicellulaires diffèrent des entreprises à un seul établissement. À l'aide de nouvelles données comprenant une correspondance entre les établissements et les entreprises, nous documentons que les établissements des entreprises multicellulaires ont une queue plus lourde que les entreprises à un seul établissement, indiquant la dominance de l'effet de sélection sur la marge intensive. La marge extensive par le regroupement des ventes à l'échelon de l'entreprise joue un rôle moins important que l'effet de sélection. Surtout, les exportateurs à un seul établissement ont une queue moins lourde que les entreprises multicellulaires qui n'exportent pas, ce qui suggère un rôle plus dominant de l'identité multicellulaire que de l'identité exportatrice pour expliquer les queues lourdes.

Suggested Citation

  • Anindya S. Chakrabarti & Shekhar Tomar, 2024. "Multi‐plant firms and the heavy tail of firm size distribution," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(3), pages 1028-1041, August.
  • Handle: RePEc:wly:canjec:v:57:y:2024:i:3:p:1028-1041
    DOI: 10.1111/caje.12732
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