Re-examination of the size distribution of firms

Details Re-examination of the size distribution of firms Re-examination of the size distribution of firms

2005-12-14

arxiv.org/abs/physics/0512124v2

Evolutionary and Institutional Economics Review 2-2 (2006)

Physics

Physics and Society

18 pages, 8 figures

Scientific paper

In this paper we address the question of the size distribution of firms. To this aim, we use the Bloomberg database comprising multinational firms within the years 1995-2003, and analyze the data of the sales and the total assets of the separate financial statement of the Japanese and the US companies, and make a comparison of the size distributions between the Japanese companies and the US companies. We find that (i) the size distribution of the US firms is approximately log-normal, in agreement with Gibrat's observation (Gibrat 1931), and in contrast (ii) the size distribution of the Japanese firms is clearly not log-normal, and the upper tail of the size distribution follows the Pareto law. It agree with the predictions of the Simon model (Simon 1955). Key words: the size distribution of firms, the Gibrat's law, and the Pareto law

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