The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology
- American Economic Journal: Macroeconomics (Forthcoming)
Development is associated with systematic changes in the firm size distribution. I document that the mean and dispersion of firm size are larger in rich countries, and increased over time for U.S. firms. To analyze the firm size-development link, I construct a frictionless general equilibrium model of occupational choice with skill-biased change in entrepreneurial technology (i.e., technical progress favors better entrepreneurs). The model accounts for key aspects of the U.S. experience with only changes in aggregate technology. It attributes half the variation in mean and dispersion of firm size across countries to technical change. Distortions also affect the size distribution.
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