Business firms range in size from boutiques operated by individuals to huge multinational corporations employing thousands. You would expect that there are fewer large businesses than small ones. In economics, however, it’s useful to characterize the size distribution of firms more precisely than that. Within an industry, for example, the firm size distribution would indicate the degree of industrial concentration–a quantity that might be of interest in setting antitrust policy.
To determine the firm size distribution in the United States, Robert L. Axtell of the Brookings Institution in Washington, D.C., turned to data gathered in 1997 by the U.S. Census Bureau. Equating size with number of employees and analyzing data for about 5.5 million U.S. tax-paying companies, he discovered that, for each 10-fold increase in size, the number of firms was roughly one-tenth as large. Axtell reported his findings in the Sept. 7 Science.