Establishment Size Dynamics in the Aggregate Economy
- (pp. 1639-1666)
Abstract
This paper presents a theory of establishment size dynamics based on the accumulation of industry-specific human capital that simultaneously rationalizes the economy- wide facts on establishment growth rates, exit rates, and size distributions. The theory predicts that establishment growth and net exit rates should decline faster with size, and that the establishment size distribution should have thinner tails, in sectors that use specific human capital less intensively. We establish that there is substantial cross-sector heterogeneity in US establishment size dynamics and distributions, which is well explained by relative factor intensities. (JEL L11 , L16, L25).Citation
Rossi-Hansberg, Esteban, and Mark L. J. Wright. 2007. "Establishment Size Dynamics in the Aggregate Economy." American Economic Review, 97 (5): 1639-1666. DOI: 10.1257/aer.97.5.1639Additional Materials
JEL Classification
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L16 Industrial Organization and Macroeconomic Industrial Structure; Industrial Price Indices
- L25 Firm Performance: Size, Diversification, and Scope