English, Article, Journal or magazine article edition: Firm Size Dynamics in the Aggregate Economy Esteban Rossi-Hansberg; Mark L.J. Wright

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Bookmark: http://trove.nla.gov.au/version/57232
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Firm Size Dynamics in the Aggregate Economy
Author
  • Esteban Rossi-Hansberg
  • Mark L.J. Wright
Physical Description
  • preprint
Notes
  • Why do firm growth and exit rates decline with size? What determines the size distribution of firms and plants? This paper addresses these questions in a dynamic model of firm size with entry and exit that emphasizes the accumulation of specific factors in response to industry specific productivity shocks. The emphasis on the accumulation and allocation of specific factors leads to new implications for the relationship between capital intensity, firm size, and firm dynamics. We show that these implications are consistent with US data.
  • Firm size, Industry equilibrium
  • RePEc:red:sed004:878
  • Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have thinner tails, in sectors that use human capital less intensively, or correspondingly, physical capital more intensively. In line with the theory, we document substantial sectoral heterogeneity in US firm dynamics and firm size distributions, which is well explained by variation in physical capital intensities.
  • RePEc:nbr:nberwo:11261
Language
  • English
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