Firm Size Distribution and Employment Fluctuations: Theory and Evidence

Holger Gorg, Philipp Henze, Viroj Jienwatcharamongkhol, Daniel Kopasker, Hassan Molana, Catia Montagna, Fredrik Sjöholm

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)
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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 languageEnglish
Pages (from-to)690-703
Number of pages14
JournalResearch in Economics
Issue number4
Early online date18 Sept 2017
Publication statusPublished - Dec 2017

Bibliographical 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,
_Study_6644_Information.htm. The usual disclaimer applies.


  • firm distribution
  • firm size
  • employment
  • fluctuations


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