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Journal article
Philipp Henze ,
Viroj Jienwatcharamongkhol ,
Daniel Kopasker ,
Hassan Molana ,
Catia Montagna ,
Fredrik Sjöholm

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.
  • Keywords

    Firm distribution, Firm size, Employment, Fluctuations
  • JEL classification

    E20, E23, L20
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