Portuguese Economic Journal

, Volume 6, Issue 1, pp 65–88 | Cite as

Small firms in Portugal: a selective survey of stylized facts, economic analysis, and policy implications

  • Luís M. B. CabralEmail author
Original Article


I survey a number of stylized facts pertaining to the dynamics of firm entry, growth, and exit in competitive industries. I focus particularly on data for Portugal, although I also consider, for comparison purposes, data from other countries. I then present a series of theoretical models that attempt to explain the stylized facts and evaluate the welfare impact of market distortions. Finally, I derive a number of policy implications, all centered around the notion of economic mobility.

JEL Classification



Small firms Firm dynamics Public policy 



I am grateful to Alberto Castro, José Mata, and two referees for their comments.


  1. Ahn S (2001) Firm dynamics and productivity growth: a review of micro evidence from OECD countries, OECD Economics Department working paper 297, Paris, FranceGoogle Scholar
  2. Albuquerque R, Hopenhayn H (2004) Optimal lending contracts and firm dynamics. Rev Econ Stud 71:285–315CrossRefGoogle Scholar
  3. Angelini P, Generale A (2005) Firm size distribution: do financial constraints explain it all? Evidence from survey data. Bank of Italy, Economic Research Department, Rome, ItalyGoogle Scholar
  4. Asplund M, Nocke V (2005) Firm turnover in imperfectly competitive markets. Rev Econ Stud 73(2):295–327CrossRefGoogle Scholar
  5. Barrios S, Gorg H, Strobl E (2005) The evolution of the firm size distribution and nationality of Ownership. Econ Bull 12:1–11Google Scholar
  6. Bartelsman E, Haltiwanger J, Scarpetta S (2004) Microeconomic evidence of creative destruction in industrial and developing countries. IZA discussion paper 1374Google Scholar
  7. Bartelsman E, Haltiwanger J, Scarpetta S (2005) Measuring and analyzing cross-country differences in firm dynamics. Free University Amsterdam, University of Maryland, World BankGoogle Scholar
  8. Bartelsman E, Scarpetta S, Schivardi F (2003) Comparative analysis of firm demographics and survival: micro-level evidence for the OECD countries, OECD Economics Department working paper 348Google Scholar
  9. Cable J, Schwalbach J (1991) International comparisons of entry and exit. In: Geroski PA, Schwalbach J (eds) Entry and market contestability. An International Comparison, Oxford, pp 257–281Google Scholar
  10. Cabral L (1995) Sunk costs, firm size and firm growth. J Ind Econ 43:161–172CrossRefGoogle Scholar
  11. Cabral L (2000) Introduction to industrial organization. MIT, Cambridge, MAGoogle Scholar
  12. Cabral L (2005) Economic mobility. In: Proceedings of the I Lisbon conference on competition law and economics, the Hague. Kluwer Law International, The NetherlandsGoogle Scholar
  13. Cabral L, Mata J (2003) On the evolution of the firm size distribution: facts and theories. Am Econ Rev 93:1075–1090CrossRefGoogle Scholar
  14. Conway P, Janod V, Nicoletti G (2003) Product market regulation in OECD countries: 1998 to 2003. OECD Economics Department working paper 419Google Scholar
  15. Cooley TF, Vincenzo Q (2001) Financial markets and firm dynamics. Am Econ Rev 91(5):1286–1310 (December)CrossRefGoogle Scholar
  16. Djankov S, La Porta R, Lopez-de-Silanes F, Shleifer A (2002) The regulation of entry. Q J Econ 117:1–38CrossRefGoogle Scholar
  17. Dunne T, Hughes A (1994) Age, size, growth and survival: UK companies in the 1980s. J Ind Econ 17:115–140CrossRefGoogle Scholar
  18. Dunne T, Roberts M, Samuelson L (1989) The growth and failure of U.S. manufacturing plants. Q J Econ 104:671–688CrossRefGoogle Scholar
  19. Ericson R, Pakes A (1995) Markov-perfect industry dynamics: a framework for empirical work. Rev Econ Stud 62:53–82CrossRefGoogle Scholar
  20. Evans D (1987) The relation between firm growth, size, and age: estimates for 100 manufacturing industries. J Ind Econ 35:567–581CrossRefGoogle Scholar
  21. Fagiolo G, Luzzi A (2004) Do liquidity constraints matter in explaining firm size and growth? Some evidence from the Italian manufacturing industry. LEM working paper 2004/08, Sant’Anna School of Advanced Studies, AprilGoogle Scholar
  22. Geroski P (1991) Market dynamics and entry. Blackwell, OxfordGoogle Scholar
  23. Geroski P (1996) What do we know about entry? Int J Ind Organ 13:421–440CrossRefGoogle Scholar
  24. Geroski P, Schwalbach J (eds)(1991) Entry and market contestability. Blackwell, OxfordGoogle Scholar
  25. Gibrat R (1931) Les Inegalités Economiques. Applications: Aux Inégalités des Richesses, a la Concentration des Entreprises, Aux Populations des Villes, Aux Statistiques des Familles, etc., d’une Loi nouvelle: La Loi de L’ffect Proportionnel. Sirey, ParisGoogle Scholar
  26. Hall B (1987) The relationship between firm size and firm growth in the U.S. manufacturing sector. J Ind Econ 35:583–606CrossRefGoogle Scholar
  27. Harberger AC (1954) Monopoly and resource allocation. Am Econ Rev 44:77–87Google Scholar
  28. Hopenhayn H (1992) Entry, exit, and firm dynamics in long run equilibrium. Econometrica 60:1127–1150CrossRefGoogle Scholar
  29. Hopenhayn H, Rogerson R (1993) Job turnover and policy evaluation: a general equilibrium analysis. J Polit Econ 101:915–938CrossRefGoogle Scholar
  30. Jovanovic B (1982) Selection and evolution of industry. Econometrica 50:649–670CrossRefGoogle Scholar
  31. Lotti F, Santarelli E (2004) Industry dynamics and the distribution of firm sizes: a non parametric approach. South Econ J 70:443–466Google Scholar
  32. Lucas R (1978) On the size distribution of business firms. Bell J Econ 9:508–523CrossRefGoogle Scholar
  33. Mata J, Portugal P (1994) Life duration of new firms. J Ind Econ 42:227–246CrossRefGoogle Scholar
  34. Mata J, Portugal P, Guimarães P (1994) The survival of new plants: start-up conditions and post-entry evolution. Int J Ind Organ 13:459–481CrossRefGoogle Scholar
  35. Olley SG, Pakes A (1996) The dynamics of productivity in the telecommunications equipment industry. Econometrica 64:1263–1297CrossRefGoogle Scholar
  36. Pakes A, Ericson R (1998) Empirical implications of alternative models of firm dynamics. J Econ Theory 79:1–45CrossRefGoogle Scholar
  37. Restuccia D, Rogerson R (2003) Policy distortions and aggregate productivity with heterogeneous plants. University of Toronto and Arizona State University, Toronto, Canada; and Phoenix, ArizonaGoogle Scholar
  38. Sutton J (1997) Gibrat’s legacy. J Econ Lit 35:40–59Google Scholar
  39. Syverson C (2004a) Product substitutability and productivity dispersion. Rev Econ Stat 86:534–50CrossRefGoogle Scholar
  40. Syverson C (2004b) Market structure and productivity: a concrete example. J Polit Econ 112:1181–1222CrossRefGoogle Scholar
  41. Tirole J (1988) The theory of industrial organization. MIT, Cambridge, MAGoogle Scholar

Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.New York UniversityNew YorkUSA
  2. 2.CEPRLondonUK

Personalised recommendations