Is there an economic measure relating production or GDP to firm size?
September 13, 2010 5:19 PM   Subscribe

Is there an economic measure that describes what proportion of GDP is produced by firms of different sizes?

I'm guessing this exists already. What I'd like to explore quantitatively is how much a given economy or industry is dominated by "big business" versus "small business".

For example, I'm interesting in a chart that could tell you that that says 50% of GDP is produced by firms of 30,000+ employees...or 50% of industry output is produced by firms with over $1B in annual revenue.

I'm interested in what this would be for both a national economy as a whole (preferable US) and different sectors such as energy and natural resources. Perhaps this measure would be interesting to chart across time.

I think what I'm getting at is quantitatively similar to an exceedance curve, but calculated with actual economic data.
posted by nowoutside to Work & Money (4 answers total) 1 user marked this as a favorite
The paper described in this abstract might interest you, although it's dated.
posted by carmicha at 6:00 PM on September 13, 2010

Look up Herfindahl index.
posted by dfriedman at 8:44 PM on September 13, 2010 [1 favorite]

Or I could just give the link:
posted by dfriedman at 8:44 PM on September 13, 2010

This is a bad measurement, as it misapprehends the meaning of GDP.

Lots of firms, of various sizes, produce things for other firms. This production is not captured in GDP, because the value-added amount will eventually be expressed in the final sale price of the goods. This means that counting at every level would involve double counting. Also, the same production could produce different GDP values depending upon how vertically integrated the production process has become.

Anyone who's looked into GST or VAT should be familiar with the issue.

Accordingly, the measure proposed in this question would show the proportional contribution of each size-band of retailers only.

Theoretically, if you had the data of the value-add at each transaction, (such as the firms would submit for their GST/VAT returns), you could determine value-add amount banded by firm size, but I don't think info would be made available in the real world.
posted by pompomtom at 10:28 PM on September 13, 2010

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