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Firm Size Distribution and Returns to Scale. Non-Parametric Frontier Estimates from Italian Manufacturing

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Abstract
This paper explores the relationship between firm size distribution and technology. We analyse firm technology across selected manufacturing industries by means of a non-parametric production analysis, the Free Disposal Hull approach (Deprins et al., 1984; Kerstens and Vanden Eeckaut, 1999) and appraise the links between size and scale elasticity, finding a clear inverse relationship. Building on this result, we inquire whether the shape of the firm size distribution is related to a particular pattern of scale elasticities. We rely on the Zipf Plot (Stanley et al., 1995) of the Pareto IV distribution, which is concave up to a given threshold, and then approximately linear. Firms in the concave part of the plot are overwhelmingly found to experience increasing returns to scale. On the contrary, firms in the linear part are mainly characterised by constant returns to scale.

Suggested Citation

  • Lisa Crosato & Sergio Destefanis & Piero Ganugi, 2009. "Firm Size Distribution and Returns to Scale. Non-Parametric Frontier Estimates from Italian Manufacturing," CSEF Working Papers 228, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:228
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    Cited by:

    1. Anna Maria Fiori, 2020. "On firm size distribution: statistical models, mechanisms, and empirical evidence," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 29(3), pages 447-482, September.
    2. Murat ATAN & Emre BOZDAĞ, 2011. "Avrupa Karbonatlı İçecekler Piyasasında Firma Büyüklüğü Ve Büyüklük Genişleme Oranı İlişkisi," Ekonomik Yaklasim, Ekonomik Yaklasim Association, vol. 22(80), pages 19-38.
    3. Hien Thu Pham & Shino Takayama, 2015. "Revisiting the Missing Middle: Production and Corruption," CEPA Working Papers Series WP022015, School of Economics, University of Queensland, Australia.
    4. Vitezić Vanja & Srhoj Stjepan & Perić Marko, 2018. "Investigating Industry Dynamics in a Recessionary Transition Economy," South East European Journal of Economics and Business, Sciendo, vol. 13(1), pages 43-67, June.
    5. Hien Thu Pham & Shino Takayama, 2017. "Firm Size Distribution, Production Efficiency, and Returns to Scale: A Stochastic Frontier Approach," Discussion Papers Series 581, School of Economics, University of Queensland, Australia.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • D20 - Microeconomics - - Production and Organizations - - - General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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