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Where Gibrat meets Zipf: scale and scope of French firms

Bee, Marco and Riccaboni, Massimo and Schiavo, Stefano Where Gibrat meets Zipf: scale and scope of French firms. Working Paper #3/2014 DEM Discussion Papers ISSN 2282-2801.

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Abstract

The proper characterization of the size distribution of business firms represents an important issue in economic literature, with the most common reference distribu- tions being the lognormal and the Pareto varieties. This analysis is related to some methodological issues that are rarely properly addressed in applied work, and may significantly affect the results: the major difficulties arise from low power of the tests caused by limited sample size and the common practice of binning the data. In this paper we contribute to this body of literature by analyzing the size distribu- tion of all French companies, strongly rejecting the hypothesis that it is a Pareto distribution. Moreover, we argue that the lognormal distribution is a more reason- able first-cut benchmark for the entire population of firms. This is especially true for single-product firms, while we show the emergence of a Zipf tail for the class of multi-product companies. Our findings are in strong agreement with some recent theoretical contributions, which predict that the size distribution depends on a set of industry specific determinants.

Item Type: Working Paper (Working Paper)
Uncontrolled Keywords: Firm size distribution; multi-product firms; Pareto; Zipf's law; lognormal - JEL Codes: C46, L11, L25
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Research Area: Economics and Institutional Change
Depositing User: Ms T. Iannizzi
Date Deposited: 03 Jul 2014 13:37
Last Modified: 03 Jul 2014 13:38
URI: http://eprints.imtlucca.it/id/eprint/2247

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