Working Paper: CEPR ID: DP3045
Authors: Lus M B Cabral; Jos Mata
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 log-normal distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraint. A calibrated version of our model does a good job at explaining the evolution of the firm size distribution.
Keywords: Financing Constraints; Firm Growth; Firm Size Distribution
JEL Codes: L00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm age (L10) | size distribution (D39) |
| financing constraints (G32) | firm growth (L26) |
| firm age (L10) | initial size (Y20) |
| education (I29) | firm size (L25) |
| financing constraints (G32) | optimal size (L25) |
| initial size (Y20) | size distribution (D39) |