Zipf's Law in Economics

Many empirical size distributions in economics and elsewhere follow Zipf?s law. Starting from the Gibrat assumption, it is essential to add a second as-sumption to explain this phenomenon.

Firm Size Distributions : An overview of steady-state distributions resulting from firm dynamics models

Empirical firm size distributions are the cumulated result of underlying firm dynamics involving entry of new firms and growth, decline, and exits of incumbent firms. In this improved version of the research�report "Firm size distributions" (H200306), we give an overview of firm size distributions that result as steady states from models differing in the way these firm dynamics are modelled. In the process we (i) derive common results and explain seemingly contradictory results, (ii) propose new functional forms to describe firm size distributions, (iii) give insight in the interrelationships between the distributions in terms of underlying firm dynamics, (iv) give possible firm dynamical interpretations of the parameters of the distributions, and (v) analyse to which extent the steadystate approach is able to explain the shape of firm size distributions that are encountered in practice.

Measuring economic effects of stimulating business R&D

Behandelt de economische effecten van subsidies voor research & ontwikkeling aan bedrijven. De impact van die extra subsidies op middellange termijn wordt geschat met behulp van het PRISMA-model SCALES.

Determinants and dimensions of firm growth

Firm growth is an important indicator of a thriving economy. Although the determinants of firm growth have been studied in various disciplines, an integrated analysis is still lacking. This paper attempts to provide such an analysis. Many determinants of firm growth are summarized and classified into three dimensions: individual, organizational, and environmental determinants. By conducting an empirical study using 523 Dutch small and medium sized firms, we identify the determinants of firm growth which is measured by employment growth. Our findings show that environmental determinants do not affect firm growth. Individual ones do: entrepreneurs with growth motivation and having technical knowledge are more likely to grow their firms while entrepreneurs characterized by a strong need of achievement are less likely to engage in firm growth. Organizational determinants have the most influence on firm growth: the older thefirm, the less likely it is to grow. Availability of financial capital is found to be crucial to firm growth. Finally, the firm’s scalability (its preparedness to grow) is found to have a positive impact on firm growth.

The influence of innovation on firm size

This study puts forward the relevance of investigating the relation between innovation and firm size, acknowledging differences between process innovation and product innovation. From different strands in economic literature, the relevance of innovation in explaining average firm size has been put forward. The efforts made so far in this particular research area, are still limited. Future empirical studies in this area would ideally require a two-way causation model and appropriate datasets. Our empirical results suggest a positive impact of innovation on average firm size. Furthermore, larger shares of process innovation per-formed by the company itself are associated with smaller average firm size.

Do Small Businesses Create More Jobs? New Evidence for Europe

In this paper we argue why, in our view, the so-called dynamic classification method should be favored when determining the contribution of small businesses towards job creation. First, it is the only method that consistently attributes job creation or loss to the size class in which it actually occurs. In addition, dynamic classification has two other advantages: (i) it is not vulnerable to the so-called regression to the mean bias and (ii) only a small number of aggregated data are required for its application. Using the dynamic classification we analyze job creation within the different size classes for the 27 Member States of the European Union. Our main findings are as follows: For the EU as a whole, smaller firms contribute on a larger scale towards job creation than larger firms do. Net job creation rates decrease with each firm size class. This pattern occurs in most industries however, not in all: the manufacturing industry and trade industry show different patterns. At the level of individual countries, the net job creation rate also tends todecrease with each firm size class. However, this relation is not perfect.

Determinants of high-growth firms

High-growth firms have been shown to be a key factor for economic growth and structural change. This paper analyses the determinants of the number of highgrowth firms in a country for 17 OECD countries between 1999 and 2005, using the Amadeus data set, the GEM data set, and others. The first contribution of this paper is that it is - as far as we know - the first empirical analysis of highgrowth firms at the country level on the basis of actual measured growth. Second, we find indicative empirical evidence for three driving forces of high growth, viz. entrepreneurship, institutional settings, and opportunities for growth, all in accordance with theory and empirical findings in related fields of research. Third, the paper gives a tentative explanation of the differences in the average percentage of high-growth firms between countries. Finally, the paper gives some clues for policy makers how to promote high-growth firms. �

PRISMA, The Size-Class Module

PRISMA is�een macrosector-model van de Nederlandse economie, geijkt op het CPB-model Athena. Het is geschikt voor analyses voor de middellange en lange termijn. Meerwaarde van het model is het onderscheiden van grootteklassen en de module die�aantallen ondernemers verklaart. Actueel gebruik�van het�model is�analyse van economische effecten van R&D-subsidies, analyse van economische effecten van administratieve lasten, en�het vaststellen van drie scenario's voor de middellangetermijn�met betrekking tot de ontwikkeling van het MKB en het aantal ondernemers. Dit rapport geeft een update van de opzet en een uitgebreide beschrijving van de logica.

PRISMA, The Size-Class Module

PRISMA - an acronym of Policy Research Instrument for Size-aspects in Macro-economic Analysis - is an economic macro-sector model. It has been designed in such a way that it produces results consistent with those produced by the current macro-sector model of CPB, Netherlands Bureau for Economic Policy Analysis. PRISMA is used for forecasting, scenario building and what-if analyses with respect to government policies and exogenous shocks. Its time horizon is 3-25 years. PRISMA consists of a kernel and a number of modules. Its kernel is documented in De Wit (2001). PRISMA's most important module is the size-class module. In this report the present version of this module is documented. In the kernel of PRISMA the business sector is subdivided into eighteen industries. In the size-class module the non-primary private industries (thirteen in total) are further subdivided into three size-classes: small (0-9 employees), medium-sized (10-99 employees), and large (100 or more employees) businesses. Hence, the following two types of model exercises become possible. Firstly, economic effects derived by PRISMA's kernel - for example when forecasting, building a scenario, or evaluating the consequences of changes in policy or the economic environment - can be 'translated' into the prospects for SMEs. Secondly, when circumstances for SMEs change differently compared to large businesses - for example due to a policy measure that focuses particularly on SMEs - the consequences can be evaluated by using the size-class module.

SMEs as job engine of the Dutch private economy

The main objective of this study is to determine to what extent small and medium-sized enterprises can be seen as the main source of employment growth for the Dutch private sector during the period 1993-1998. To this end, we will decompose the employment growth over this period into size classes. �