Firm size distribution and growth: An empirical investigation

This paper investigates the extent to which the distribution of firm sizes affects growth and productivity. The empirical analysis is underpinned by a multilevel database comprising information on manufacturing sectors of 35 countries disaggregated in five firm size classes. Three complementary strategies to assess the relationship are implemented. The first, a country-level counterfactual analysis, measures the hypo-thetical impact of a firm reallocation to reflect a benchmark market structure. It is followed by a decom-position exercise that illustrates the impact of both the structural and technological components on the annual productivity growth between 1991 and 2007. Finally, different econometric models are estimated to assess the statistical significance of changes in the firm size distribution on growth and the role of the concentration of the market structure in explaining the cross-country productivity discrepancies. The results suggest that the firm size is a key driver the development process.(c) 2022 Elsevier B.V. All rights reserved.