Firm Size Distribution and Employment Fluctuations: Theory and Evidence

Holger Gorg; 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 Gorg, Philipp Henze, Viroj Jienwatcharamongkhol, Daniel Kopasker, Hassan Molana, Catia Montagna, 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 Sep 2017
DOIs	https://doi.org/10.1016/j.rie.2017.09.002
Publication status	Published - Dec 2017

Keywords

firm distribution
firm size
employment
fluctuations

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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, 333 KBLicence: CC BY-NC-ND

Catia Montagna
- Business School, Economics - Jaffrey Chair of Political Economy
- Centre for Energy Transition
Person: Academic

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{\textquoteright}s employment and output. A theoretical model predicts that changes in demand for an industry{\textquoteright}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",

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

note = "We thank an anonymous referee and Federico Etro for helpful comments and suggestions. 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. We gratefully acknowledge the professional assistance of UK Data Service, http://doc.ukdataservice.ac.uk/doc/6644/mrdoc/UKDA/UKDA _Study_6644_Information.htm. The usual disclaimer applies.",

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doi = "10.1016/j.rie.2017.09.002",

language = "English",

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T2 - Theory and Evidence

AU - Gorg, Holger

AU - Henze, Philipp

AU - Jienwatcharamongkhol, Viroj

AU - Kopasker, Daniel

AU - Molana, Hassan

AU - Montagna, Catia

AU - Sjöholm, Fredrik

N1 - We thank an anonymous referee and Federico Etro for helpful comments and suggestions. 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. We gratefully acknowledge the professional assistance of UK Data Service, http://doc.ukdataservice.ac.uk/doc/6644/mrdoc/UKDA/UKDA _Study_6644_Information.htm. The usual disclaimer applies.

PY - 2017/12

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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.

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KW - firm size

KW - employment

KW - fluctuations

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DO - 10.1016/j.rie.2017.09.002

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JO - Research in Economics

JF - Research in Economics

SN - 1090-9443

IS - 4

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Firm Size Distribution and Employment Fluctuations: Theory and Evidence

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Keywords

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Catia Montagna

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