Journal of Industry, Competition and Trade

, Volume 10, Issue 3–4, pp 389–395 | Cite as

The Exponential Age Distribution and the Pareto Firm Size Distribution

Article

Abstract

Recent work drawing on data for large and small firms has shown a Pareto distribution of firm size. We begin by showing that the firm age distribution is well approximated by an exponential distribution. We then mix a Gibrat-type growth process among incumbents with an exponential distribution of firm’s age, to obtain the empirically-observed Pareto distribution.

Keywords

firm size distribution age distribution firm growth Gibrat’s law Pareto distribution Zipf Law 

JEL Classifications

L20 L25 

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Evolutionary Economics GroupMax Planck Institute of EconomicsJenaGermany

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