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Firm Size and Development
- Economía
- Brookings Institution Press
- Volume 17, Number 1, Fall 2016
- pp. 27-49
- 10.1353/eco.2016.a634030
- Article
- Additional Information
Firm size increases with GDP per capita. The paper develops a simple framework to explore three alternative sources of variation that may explain this correlation: (1) excessive entry; (2) differences in the distribution of firm productivities; and (3) differences in returns to scale. The results show that all these sources of variation lead to substantial differences in firm size. GDP per capita is also significantly affected, but by an order of magnitude less.