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Author: | Aquilina, M. Klump, R. Pietrobelli, C. |
Title: | Factor substitution, average firm size and economic growth |
Journal: | Small business economics
2006 : APR, VOL. 26:3, p. 203-214 |
Index terms: | small and medium-sized enterprises (SMEs) companies by size economic growth equilibrium analysis models |
Freeterms: | SME |
Language: | eng |
Abstract: | This paper extends the Lucas' (publ. in 1978 by The Bell Journal of Economics vol. 9:2, p. 508-523) analysis of firm size (here as: fr-sz.) by taking into account a normalized aggregate constant elasticity of substitution (CES) production function. In a general equilibrium framework, there is proved to exist an inverse relation btw. the elasticity of substitution (as: e-of-s.) and average fr-sz. This result can explain why there is a positive association found btw. the importance of SMEs in an economy and its stage of development, but seemed to fail in finding causality btw. the two. Both have a common origin: a high value of the e-of-s. In this paper, also provided is a first empirical test of the theory proposed using cross-country data from both developed and developing countries. |
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