Firm size distribution and employment fluctuations: Theory and evidence

Holger Görg; Philipp Henze; Viroj Jienwatcharamongkhol; Daniel Kopasker; Hassan Molana; Catia Montagna; Fredrik Sjöholm

doi:10.1016/j.rie.2017.09.002

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 language	English
Pages (from-to)	690-703
Number of pages	14
Journal	Research in Economics
Volume	71
Issue number	4
Early online date	18 Sept 2017
DOIs	https://doi.org/10.1016/j.rie.2017.09.002
Publication status	Published - Dec 2017

Keywords

Employment
Firm distribution
Firm size
Fluctuations

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/j.rie.2017.09.002

Author Accepted Manuscript
© 2017. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Accepted author manuscript, 1.12 MBLicence: CC BY-NC-ND

Molana, Hassan
- Business Office - Emeritus Professor of Economics
Person: Honorary

Cite this

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title = "Firm size distribution and employment fluctuations: Theory and evidence",

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.",

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author = "Holger G{\"o}rg and Philipp Henze and Viroj Jienwatcharamongkhol and Daniel Kopasker and Hassan Molana and Catia Montagna and Fredrik Sj{\"o}holm",

note = "This research was supported by the NORFACE ERA-NET (New Opportunities for Research Funding Agency Co-operation in Europe Network) Welfare State Futures Programme, Grant Number 462-14-120. ",

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T2 - Theory and evidence

AU - Görg, Holger

AU - Henze, Philipp

AU - Jienwatcharamongkhol, Viroj

AU - Kopasker, Daniel

AU - Molana, Hassan

AU - Montagna, Catia

AU - Sjöholm, Fredrik

N1 - This research was supported by the NORFACE ERA-NET (New Opportunities for Research Funding Agency Co-operation in Europe Network) Welfare State Futures Programme, Grant Number 462-14-120.

PY - 2017/12

Y1 - 2017/12

N2 - 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.

AB - 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.

KW - Employment

KW - Firm distribution

KW - Firm size

KW - Fluctuations

U2 - 10.1016/j.rie.2017.09.002

DO - 10.1016/j.rie.2017.09.002

M3 - Article

AN - SCOPUS:85029768117

SN - 1090-9443

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SP - 690

EP - 703

JO - Research in Economics

JF - Research in Economics

IS - 4

ER -

Firm size distribution and employment fluctuations: Theory and evidence

Abstract

Keywords

ASJC Scopus subject areas

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Molana, Hassan

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