The size distribution of plants and economic development

The plant size distribution differs systematically across developed and developing countries. For example, in developing countries, less than one fifth of 1% of plants are large (employ 100 or more employees) and account for about one fifth of total employment. In sharp contrast, in developed countries, more than 1.6% of plants are large and account for more than two fifth of total employment. In this dissertation, I develop a model of plant size to account for the differences in the plant size distribution observed in the data. In the first chapter, I explore the link between plant size distribution and economic development. I also discuss the main features of the plant size distribution data. The purpose of this data set is to provide evidence of systematic differences in plant size distribution across developed and developing countries. In the second chapter, I present a dynamic employment choice model in a life cycle setting. Then I calibrate the benchmark model to match some key features of the U.S. plant size distribution. I find that my model can capture the critical features of U.S. plant size distribution including the upper tail which accounts for the bulk of the employment and output in the U.S. economy. In the third chapter, I explore how exogenous differences in aggregate barriers to investment and technology across countries affect the plant size distribution. Results indicate that exogenous differences in aggregate barriers to investment and technology across countries can account for more than 50% of the variation in both the fraction of large plants and employment share in large plants across countries. For the same group of countries, exogenous differences in aggregate barriers also account for 36% of the variation in the mean size.