Firm size distribution and employment fluctuations: Theory and evidence

Holger Görg, Philipp Henze, Viroj Jienwatcharamongkhol, Daniel Kopasker, Hassan Molana, Catia Montagna (Lead / Corresponding author), Fredrik Sjöholm

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    Abstract

    We show that the firm-size distribution is an important determinant of the relationship between an industry's employment and output. A theoretical model predicts that changes in demand for an industry's output have larger effects on employment, resulting from adjustments at both the intensive and extensive margin, in industries characterised by a distribution that has a lower density of large firms. Industry-specific shape parameters of the firm size distributions are estimated using firm-level data from Germany, Sweden and the UK, and used to augment a relationship between industry-level employment and output. The empirical results align with the predictions of the theory.

    Original languageEnglish
    Pages (from-to)690-703
    Number of pages14
    JournalResearch in Economics
    Volume71
    Issue number4
    Early online date18 Sep 2017
    DOIs
    Publication statusPublished - Dec 2017

    Keywords

    • Employment
    • Firm distribution
    • Firm size
    • Fluctuations

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    Görg, H., Henze, P., Jienwatcharamongkhol, V., Kopasker, D., Molana, H., Montagna, C., & Sjöholm, F. (2017). Firm size distribution and employment fluctuations: Theory and evidence. Research in Economics, 71(4), 690-703. https://doi.org/10.1016/j.rie.2017.09.002