ABSTRACT
This chapter explores the relationship between firm size distribution and patterns of returns to scale. In the literature about firm size distribution, it has often been noted that firms of very small and (to a lesser extent) very large size tend to deviate from Gibrat's Law, according to which a firm's size and its rate of growth are uncorrelated. Thus, different regimes of growth seem to exist for differently sized firms. Yet the literature provides no consistent attempt to relate these different regimes to firms’ technological features, and in particular to their returns-to-scale patterns. There is a widespread belief that firms experiencing the law of proportionate effect are characterized by constant returns to scale, but no clear-cut opinion is provided on the nature of returns to scale for other firms. This chapter aims to assess the expected association between constant returns to scale and Gibrat's Law, as well as to explore the possibility that different regimes of growth are systematically characterized by non-constant returns to scale.
