DISSECTING THE SIZE DISTRIBUTION OF ESTABLISHMENTS ACROSS COUNTRIES

We present a detailed description of cross-country differences in the size distribution of establishments as measured by Enterprise Surveys of the World Bank (2006-2010). We find that poorer countries tend to have smaller establishments, and hence a higher proportion of employment is allocated to such plants. We also find that, conditional on the level of per capita GDP, there is still a wide variation in the size distribution of establishments. We show that financial frictions and other costs imposed on the business environment can account for a sizeable part of such variation. Additionally, we exploit the richness of the data-set to document cross-sector differences in the size distribution of establishments. We show that establishments in manufacturing and construction tend to be larger on average than in retail and other services.