ABSTRACT
Introduction The size distribution of firms in the industrial sector is an important issue from the point of view of the ability of the sector to make efficient use of the factors of production available to it. As explained in the theoretical section below, if factor markets, particularly of labor, capital and entrepreneurship, operated smoothly without too much “segmentation”, the distribution of firms by size would approximate a lognormal distribution. On the other hand, if small firms faced serious impediments to growth due to differential factor prices facing firms of different sizes, we would tend to observe a bi-modal distribution which has been described in the literature as a case of “industrial dualism.” This type of distribution is costly to the economic sector in terms of loss of efficiency and it also causes the distribution of assets as well as earnings to be more unequal than otherwise. We begin therefore by looking at the size distribution in terms of employment from the data set generated by the RPED surveys. Since the RPED surveys, we explain, may not for all countries be fully reflective of the universe of manufacturing enterprises they sampled, other sources of data on size distribution are also referred to in the discussion.
