Top PDF Institutional Effects on the Evolution of the Size Distribution of Firms

Institutional Effects on the Evolution of the Size Distribution of Firms

Institutional Effects on the Evolution of the Size Distribution of Firms

Magnus Henrekson 1 and Dan Johansson 2 January 1999 Abstract: In this paper it is argued that the size distribution of firms may largely be deter- mined by institutional factors. This hypothesis is tested in an exploratory fashion by studying the evolution of the size distribution of firms over time in Sweden for a period spanning from the late 1960s to the early 1990s. The data used is divided into finer size classes compared to most previous studies. This gives more scope for investigating the impact of institutions. Moreover, we use a unique data set, starting in 1984, to take account of corporate groups and government ownership. The analysis shows a poor development for intermediate-sized (10– 199 employees) firms. This is likely to reflect the existence of a threshold that many firms are either unwilling or unable to cross. The analysis of the institutions and rules of the game determining the entrepreneurial and business conditions in Sweden indicate that the conditions have been unfavorable for small firms, and hence that too few small firms have managed to grow out of the smallest size classes. The conclusion is supported by an international comparison of the number of firms in different size classes. Data indicate that Sweden has fewer small (10–99 employees), and more large (500+) firms per capita than other European countries.
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Some evidence about the evolution of the size distribution of Italian firms by age

Some evidence about the evolution of the size distribution of Italian firms by age

In this short note we are interested in the distribution of Italian firm size by age. In the wake of other recent work, such as Cabral and Mata (2003) [On the evolution of firm size distribution: facts and theory. American Economic Review 93, 1075-1090] for Portuguese companies, we aim to verify if the size distribution of young firms (less than 5 years old) is sensibly different from that of older firms (more than 30 years old). To perform our analysis we use a very comprehensive industrial panel, with about 25k firms for twenty years of observations. As far as the results are concerned, it is possible to verify a clear difference in the size distribution of firms by age, for which we give a good fit using the generalized beta distribution of the second kind.
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The Evolution of the Firm Size Distribution and Nationality of Ownerhship

The Evolution of the Firm Size Distribution and Nationality of Ownerhship

One possibility may be that our results are due to sample selection bias – i.e., the right skewness of domestic plants, particularly at earlier ages, is driven by non-surviving plants that exit at an early age. As formalised by Jovanovic (1982), the expectation is that plants start at less than optimal size and only over time acquire their abilities and either grow or exit the industry. Given the characteristics of foreign-owned firms, which are affiliates of multinationals, we would not expect such selection mechanisms to have the same influence, in particular because foreign affiliates benefit directly from the experience and other firm-level assets of their parent companies which bring them with a distinctive advantages over domestic plants in the host country, see Markusen (1995, 2002).
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Time Evolution of the Mutual Fund Size Distribution

Time Evolution of the Mutual Fund Size Distribution

There are many reasons for our interest in the determinants of fund size, some of which relate to the properties of firms in general and others that are specific to finance. Mutual funds are of course a type of firm, and provide a particularly good object for study because there are a large number of funds and their size is accurately recorded. The distribution of firm sizes is consistently observed to be strongly right skewed, i.e. the mode is much smaller than the median and both are much smaller than the mean [1, 2, 6, 17, 32, 36, 37, 39, 40]. Many different stochastic process models have been proposed to explain this [20, 21, 23, 29, 32, 33, 38, 40]. All these models yield right skewness but the degree of skewness varies. The two principal competing hypotheses are that the tail of the size distribution p(s) is either log-normal or a power law. Log-normality means that log s has a normal distribution, while power law means that the cumulative distribution P for large s is of the form
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On the Evolution of the Firm Size Distribution in an African Economy

On the Evolution of the Firm Size Distribution in an African Economy

There are several notable features about the figures in the table. First, the modest average net growth rates observed in the previous section belie a high level of churning in the firm size distribution and considerable heterogeneity in growth rates. Firms beginning in the middle size ranges fan out to virtually all points in the distribution over 16 years. Second, in the jargon of Markov analysis, the system is said to communicate across the entire distribution. This simply means that all size classes are, in a probabilistic sense, achievable from any given starting point over a sufficiently long span of time (i.e., repeated iterations of the matrix). It is significant to point out, however, that even over the fairly long time span used here, there are no observed cases of microenterprises maturing into large scale employers. Third, the bottom row of the table presents the ergodic distribution implied by the transition matrix. Assuming infinite lives for all firms, there is evidence of an emerging bimodal distribution among Ghanaian firms. While the actual realization of this distribution is prevented by firm death, this pattern is further evidence that small and large firms should be understood as fundamentally different, rather than simply occupying different points in a life-cycle trajectory.
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Human capital and the size distribution of firms

Human capital and the size distribution of firms

We also contribute to the literature on public sector employment where most theoretical papers proposes models with homogeneous workers and analyze crowding-out effects for pri- vate sector employment and effects on wages; see e.g. Finn [ 1998 ] in an RBC model or Gomes [ 2015 ] in a search and matching model. Albrecht et al. [ 2016 ] and Gomes [ 2016 ] who both analyze how workers with different qualifications select themselves into the public and private sector are among the few papers that consider potentially distinct effects across skill groups. Prior to that Domeij and Ljungqvist [ 2006 ] pointed out that the expansion of the Swedish public sector, that hired more low-skilled workers, was able to explain part of the difference in the evolution of the skill premium between the United States and Sweden. Re- garding outcomes, to the best of our knowledge Cavalcanti and Rodrigues dos Santos [ 2014 ] is the only other paper that analyses how public employment affects occupational choices and entrepreneurship. The authors propose a model where well paid public sector jobs distort occupational choices of individuals as well as firms’ input choices, leading to sizable output losses. In line with our results, the authors find that lower levels of public employment can increase entrepreneurship.
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Human capital and the size distribution of firms

Human capital and the size distribution of firms

We also contribute to the literature on public sector employment where most theoretical papers proposes models with homogeneous workers and analyze crowding-out effects for pri- vate sector employment and effects on wages; see e.g. Finn [1998] in an RBC model or Gomes [2015] in a search and matching model. Albrecht et al. [2016] and Gomes [2016] who both analyze how workers with different qualifications select themselves into the public and private sector are among the few papers that consider potentially distinct effects across skill groups. Prior to that Domeij and Ljungqvist [2006] pointed out that the expansion of the Swedish public sector, that hired more low-skilled workers, was able to explain part of the difference in the evolution of the skill premium between the United States and Sweden. Re- garding outcomes, to the best of our knowledge Cavalcanti and Rodrigues dos Santos [2014] is the only other paper that analyses how public employment affects occupational choices and entrepreneurship. The authors propose a model where well paid public sector jobs distort occupational choices of individuals as well as firms’ input choices, leading to sizable output losses. In line with our results, the authors find that lower levels of public employment can increase entrepreneurship.
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Portfolio Effects and Firm Size Distribution: Carbonated Soft Drinks

Portfolio Effects and Firm Size Distribution: Carbonated Soft Drinks

III FIRM SIZE DISTRIBUTION IN CARBONATED SOFT DRINKS The key structural feature of Sutton’s (1998) theory of limiting firm size distribution is the arrival, in the history of a defined market, of a number of discrete investment opportunities (segments) over an infinite period for firm populations. Assuming opportunities of equal size arrive and can only be filled by one firm, the market begins with a single firm of size 1. Each subsequent opportunity is taken up by either a new firm or existing firm. If opportunities were taken up in succession by new firms, the resultant limiting size distribution will display perfect equality between firms of size 1. Differences in firm size emerge when firms have taken up a different portfolio of opportunities or, what Sutton labels, roles in the market. Sutton (1998) puts weak restrictions on the form of the entry game into each of these segments as they arrive in the history of the market to model a lower bound on the size distribution of firms in a market.
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Dynamic Evolution of Droplet/Particle Size Distribution in Suspension Polymerization of Styrene

Dynamic Evolution of Droplet/Particle Size Distribution in Suspension Polymerization of Styrene

The present model was employed to predict the dynamic evolution of PSD in the free- radical suspension polymerization of styrene. More specifically, the effects of agitation rate and temperature on the PSD were investigated for the polystyrene suspension polymerization process. Fig. 6 shows the dynamic evolution of the mean diameter of styrene/polystyrene particles. The temperature was kept at 70°C and 0.05 (mol/L) of AIBN was used as the initiator in the suspension polymerization of styrene. The agitation speed was 240 rpm, while 1 (gr/L) of PVA was added to the aqueous phase for stabilization of the dispersion. The dynamic evolution of styrene/ polystyrene particle size distribution (PSD) in aqueous dispersion was experimentally studied by Konno et al. [12]. As can be seen from Fig. 6 and Fig. 7, there is good agreement between the experimental [12] and model prediction.
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The Evolution of Electronic Distribution: Effects on Hotels and Intermediaries

The Evolution of Electronic Distribution: Effects on Hotels and Intermediaries

The Evolution of Electronic Distribution: Effects on Hotels and Intermediaries Abstract [Excerpt] Electronic-distribution-channel options constitute a complex web of choices through which suppliers and buyers of hospitality services must carefully navigate to ensure favorable financial results. The firms that compete in electronic distribution are internet-based companies, GDSs, DSPs, travel agents, and the hotel chains themselves. Individual properties face two major challenges from electronic distribution: 1. control over price and availability and 2. the management of web site content. To maintain price control, properties and the chains that operate them must structure rates effectively, apply terms and conditions to avoid dilution and arbitrage, monitor competitiveness, and manage rate accuracy and availability.
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The evolution of farm size distribution: revisiting the Markov chain model

The evolution of farm size distribution: revisiting the Markov chain model

Markov Chain Model (MCM) is proposed to project the number and the population structure of farms. It is then applied to the population of professional French farms. Rather than working directly with transition probabilities as in the traditional, discontinuous, MCM, this approach relies on the close but not identical concept of growth rate probabilities and exploits the Gibrat’s law of proportionate effects which appears to be supported by the French data. It is shown that the proposed continuous MCM is a more general approach, since it enables to derive more in-depth detail on the distrubtion of the projected population and the traditional MCM transition probability matrix can be easily reconstructed from the estimated growth rate probabilities. Though the continuous MCM is presented in this paper in a stationary framework, it should be possible to develop a non-stationary version in a similar way traditional MCMs are now made non-stationary.
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Interaction of Size and Momentum Effects in Jordan Firms: 2005-2014

Interaction of Size and Momentum Effects in Jordan Firms: 2005-2014

Daniel, Hirshleifer and Subrahmanyam (1998) present behavioural explanation of return persistence and reversals suggesting that investors display overconfidence and self-attribution biases, especially in certain kinds of industries over time. Overconfidence among investors may be generated by the difficulty in estimating the value of new or changing industries. These investors are simultaneously employed in these sectors or avocation associated with these sectors, which overstates industry mispricing. Hong and Stein (1999) present another behavioural explanation of return persistence and reversals pointing out that an initial under-reaction to news can be generated by disseminating slow information into prices, but the existence of momentum traders searching to utilize the slow price movement generates following reversals. In the US stock market, Moskowitz and Grinblatt (1999) show a strong and prevalent momentum industry effect. Industry momentum investment strategies generate high profit even after controlling for the cross- sectional distribution in mean returns, individual stock momentum, size, book-to-market equity and potential microstructure influence. They find that momentum investment strategies are significantly less profitable after controlling for industry momentum. Moskowitz and Grinblatt (1999) find that the individual stock momentum strategy provide an annual six percent return, while Jegadeesh and Titman (1993) document larger return than Moskowitz and Grinblatt’s (1999) finding of about twelve percent per year. This larger return documented by Jegadeesh and Titman (1993) is attributed to using ten percent breakpoints and equal –weighted the stocks within their winner and loser portfolio. However, increasing the average return reported by Jegadeesh and Titman (1993) does not change Moskowitz and Grinblatt’s (1999) finding. Conversely, the evidence in Grundy and Martin (2001) suggest that cross-sectional variation in future returns or industry impact and time-varying factor exposures cannot explain momentum effects.
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The effects of size-based regulation on small firms: evidence from VAT threshold

The effects of size-based regulation on small firms: evidence from VAT threshold

Various types of size-based regulations for firms are typical in most countries (tax schedules, accounting rules, health and safety standards etc.). However, there is only limited evidence of how owners of small firms respond to such rules, and what are the underlying mechanisms behind the observed behavior. We study these questions by examining the effects of the value-added tax (VAT) sales threshold using tax register data on the universe of Finnish firms and their owners. We find sizable bunching of firms in the sales distribution just below the VAT threshold. This implies that small firms actively avoid VAT liability. We utilize variation in both the VAT rate and reporting requirements to provide compelling evidence that the response is caused by the compliance costs of VAT reporting rather than the size of the tax rate. This shows that the costs related to reporting and understanding taxes induce greater distortions than pure tax incentives, especially among low-income entrepreneurs. In addition, we find no explicit evidence of avoidance or evasion, which suggests that firms respond by reducing their true output. Also, bunching behavior is very permanent, implying that the VAT threshold hinders the growth of small firms.
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The Effects of Size-Based Regulation on Small Firms: Evidence from Vat Threshold

The Effects of Size-Based Regulation on Small Firms: Evidence from Vat Threshold

empirical literature examining the effects of different size-based rules and regulations on firm behavior. Best et al. (2015) observe that firms bunch sharply at the kink point that separates the turnover and profit tax regimes in Pakistan. They utilize variation in incentives over time and across firms to show that, unlike our results, the observed behavior is mainly driven by tax evasion. Gourio and Roys (2014) and Garicano et al. (2016) examine the effects of an employee threshold (50 pers.) in France above which many types of costs and regulations are increased and tightened (e.g. the payroll tax rate and firing costs). Both of these papers find that this threshold clearly affects the firm-size distribution and the productivity of firms. Almunia and Lopez-Rodriguez (2016) study the responses to a tax enforcement threshold using Spanish firm data. They find that large firms avoid exceeding the stricter enforcement by bunching just below the threshold, and observe that the effect is driven by evasion responses. In contrast, they do not find any bunching at a corporate tax rate kink point, thus providing suggestive evidence that firms respond more to regulatory thresholds compared to discontinuous changes in tax incentives.
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A Century of Shocks: The Evolution of the German City Size Distribution 1925 – 1999

A Century of Shocks: The Evolution of the German City Size Distribution 1925 – 1999

The empirical literature on city size distributions has mainly focused on the USA. The first major contribution of this paper is to provide empirical evidence on the evolution and structure of the West-German city size distribution. Using a unique annual data set that covers most of the 20th century for 62 of West-Germany's largest cities, we look at the evolution of both the city size distribution as a whole and each city separately. The West-German case is of particular interest as it has undergone major shocks, most notably WWII. Our data set allows us to identify these shocks and provide evidence on the effects of these `quasi-natural experiments' on the city size distribution. The second major contribution of this paper is that we perform unit-root tests on individual German city sizes using a substantial number of observations to analyze the evolution of the individual cities that make up the German city size distribution. Our main findings are twofold. First, WWII has had a major and lasting impact on the city size distribution. Second, the overall city size distribution does not adhere to Zipf's Law. This second finding is largely based on the results of unit root tests for individual cities to test for Gibrat's Law, the latter being a requirement for Zipf's Law to hold for the overall city-size distribution. Together these two findings are consistent with theories emphasizing increasing returns to scale in city growth.
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The evolution of US city size distribution from a long term perspective (1900 2000)

The evolution of US city size distribution from a long term perspective (1900 2000)

Ioannides (2001) point out, the US system is characterized by the entry of new cities. While other countries (such as European countries) have an already consolidated urban structure and new cities are rarely created (urban growth is produced by population increase in existing cities), in the US, urban growth has a double dimension: as well as increases in city size, the number of cities also increases, with potentially different effects on city size distribution. Figure 1, although showing only cities of more than 10,000 inhabitants, illustrates this fact clearly by showing a large increase in the number of cities in the twentieth century. In fact, the number of incorporated places in the sample increased from 10,596 in 1900 to 19,296 in 2000. Table 1 presents the number of cities for each decade, the percentage that the incorporated places in the database represent of the total population of the US, and the descriptive statistics. A glance at the minimum values of each decade enables us to state that absolutely all incorporated places, for which data exist, are included, without size restrictions; even the smallest units. Although their urban character is debatable, Eeckhout (2004) suggested considering the whole distribution. In contrast, other authors impose a minimum population threshold. In any case, incorporated places with a population under 2,500 represent only 17.62% of the population of our sample of incorporated places in 1900, and 5.61% in 2000 (8.27% and 3.45% in terms of the total US population in 1900 and 2000, respectively).
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Evolution of maternal egg size effects in sister salamander species

Evolution of maternal egg size effects in sister salamander species

Egg size varies dramatically in amphibians - within and between clutches, individuals, populations and species (Salthe 1969; Ka- plan, 1980; Duellman and Trueb 1986; Wells 2007). This maternal variation has been the focus of theoretical and empirical research because of its potential to affect fitness and evolution (Kaplan and Cooper 1984; Bernardo 1996a; Nussbaum 2003). Females have a finite amount of space within the body for total clutch volume, and therefore increases in allocation to individual eggs limit the total number of eggs she can produce at one time (Kaplan and Salthe 1979). The evolutionary outcome of this trade-off is largely deter- mined by the complex phenotypic effects related to egg size and their impacts on offspring growth and survival (models like Smith and Fretwell 1974). However, often, a single optimum egg size does not appear to evolve; rather, egg size varies within clutches as a bet-hedging strategy (Kaplan and Cooper 1984; Bernardo 1996b). This range of egg sizes ensures a phenotypically diverse set of offspring that may be well-suited to unpredictable and het- erogeneous environments.
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Evolution of dust grain size distribution by shattering in the interstellar medium: Robustness and uncertainty

Evolution of dust grain size distribution by shattering in the interstellar medium: Robustness and uncertainty

Based on the formulation developed by Hirashita and Yan (2009), Hirashita et al. (2010, hereafter H10) consider small grain production by shattering in the context of galaxy evolution. H10 assume that Type II SNe (SNe II) are the source of the first dust grains, which are biased to large sizes ( 0.1 μm) because small grains are destroyed in the shocked region in the SNe II (Nozawa et al., 2007, hereafter N07). Starting with the size distribution of SNe II dust grains in N07, H10 solve the shattering equation to calculate the evolution of grain size distribution. They show that the velocity dispersions acquired by the dust grains in a warm ionized medium (WIM) is large enough for shattering to produce a large abundance of small grains on a short ( 10 Myr) timescale. As mentioned above, even if we consider other sources of dust such as the dust formation in the wind of AGB stars and the accretion of metals onto grains in the interstellar clouds, shattering is generally necessary to produce small grains (Asano et al., 2013b).
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Binning effects on in-situ raindrop size distribution measurements

Binning effects on in-situ raindrop size distribution measurements

33 Fig. 1. Top panel: Bins analysed in this study showing the central size classification values used by each instrument, as extracted from Campos and Zawadzki (2000); Sheppard and Joe (1994); Loffler-Mang and Joss (2000). The information of Thies and Parsivel OTT disdrometers were provided by the manufacturer. In the case of Parsivel OTT the first and second bins were eliminated as the instrument does not record information on these bins. Bottom panel: The composite DSD resulting from the generation of 200 samples is shown for the category of moderate rainfall intensity. The relevance of the binning process is observed, even in smaller drops where the density of bins is greater.
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The Size and Growth of Firms

The Size and Growth of Firms

5 A limited analysis of " births" and" deaths" has shown: a that, although the incidence of births declines with an increase in firm size, a considerable number of births occur in all si[r]

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