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The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology

Markus Poschke
2/1/2014
Online article
Entrepreneurship

This paper shows that in richer countries, firms are on average larger, and their size is more dispersed and more skewed. Essentially, large firms are larger in richer countries. Several of these facts are documented here for the first time. These patterns fit well with a model where there is "skill-biased change in entrepreneurial technology": more skilled entrepreneurs benefit more from new technologies than others, which is why they run larger firms in richer countries. In these countries, employment is also more attractive, motivating less skilled entrepreneurs to switch.

This simple, technology-driven explanation is consistent with patterns in the US over time, and with cross-country patterns. Still, scope for other determinants of firm sizes remain.

Paper link: http://www.iza.org/en/webcontent/publications/papers/viewAbstract?dp_id=7991

Technology 2
Photo credit: Flickr @kev-shine (http://www.flickr.com/photos/kevinshine/)
Tags: South Asia;Africa;Europe and Central Asia;Latin America and Caribbean;Middle East and North Africa;East Asia and Pacific
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