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)
Cabral, Luís, M B, and José Mata.
2003."On the Evolution of the Firm Size Distribution: Facts and Theory."American Economic Review,