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Firm size and development

Author

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  • Hopenhayn, Hugo A.

Abstract

Firm size increases with GDP per capita. The paper develops a simple framework to explore three alternative sources of variation that may explain this correlation: (1) excessive entry; (2) differences in the distribution of firm productivities; and (3) differences in returns to scale. The results show that all these sources of variation lead to substantial differences in firm size. GDP per capita is also significantly affected, but by an order of magnitude less. JEL classifications: O11, E13

Suggested Citation

  • Hopenhayn, Hugo A., 2016. "Firm size and development," LSE Research Online Documents on Economics 123074, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:123074
    as

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    File URL: http://eprints.lse.ac.uk/123074/
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    References listed on IDEAS

    as
    1. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    2. Pedro Bento & Diego Restuccia, 2017. "Misallocation, Establishment Size, and Productivity," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 267-303, July.
    3. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 5266, London School of Economics and Political Science, LSE Library.
    4. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552, Elsevier.
    5. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    aggregate productivity; firm size distribution; firm dynamics; misallocation;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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