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.
|Number of pages||14|
|Journal||Research in Economics|
|Early online date||18 Sept 2017|
|Publication status||Published - Dec 2017|
- Firm distribution
- Firm size
ASJC Scopus subject areas
- Economics and Econometrics
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- University of Dundee School of Business - Emeritus Professor of Economics