There has been a lot of evidence about the firm size distribution (as measured in employment) being Pareto (see for example Luttmer 2007), but what are the properties of this distribution over the business cycle?

  • $\begingroup$ So, Luttmer describes some static distribution of firm size and you want to know if there is any data on how this distribution changes over time? $\endgroup$
    – jmbejara
    Feb 6, 2015 at 23:20
  • $\begingroup$ @jmbejara Exactly. $\endgroup$
    – FooBar
    Feb 6, 2015 at 23:42

1 Answer 1


These guys (paper) claim the distribution is still power-law, but steeper in recessions and flatter in booms.

[Content added after suggestion]

While it is well known that the distribution of firm sizes (in the US at least) looks like a power law distribution, these guys look at whether it changes in shape over the business cycle.

They show that (in log-log space) the distribution is actually a power law in both recessions and expansions, but its not the same power law, its steeper in recessions and flatter in booms, meaning that large firms become relatively larger in booms than in recessions, or alternatively that there is a lot of entry of small firms in booms.

  • 1
    $\begingroup$ This is a link only answer. Please copy the gist of the relevant information from the paper you linked. $\endgroup$
    – Giskard
    May 14, 2016 at 6:08

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