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American Economic Review: Vol. 93 No. 4 (September 2003)

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On the Evolution of the Firm Size Distribution: Facts and Theory

Article Citation

Cabral, Luís M B, and José Mata. 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory." The American Economic Review, 93(4): 1075-1090.

DOI: 10.1257/000282803769206205

Abstract

Using a comprehensive data set of Portuguese manufacturing firms, we show that the firm size distribution is significantly right-skewed, evolving over time toward a lognormal distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraints. A calibrated version of our model does a good job at explaining the evolution of the firm size distribution. (JEL L11)

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Authors

Cabral, Luís M B
Mata, José


American Economic Review



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