Explaining the Size Distribution of Plants: An Approach Based on Civic Capital
Quaderni DSE Working Paper No. 755
40 Pages Posted: 13 Jun 2011
Date Written: June 1, 2011
Abstract
We show that the distribution of plant size within narrowly defined industries is affected by the variation in the stock of civic capital that occurs at the provincial level. Data on plant size come from the 2001 Italian Census of Manufacturing and Services. Civic capital turns out to have a positive effect on both the average and the standard deviation of the plant size distribution. This effect is stronger in labor-intensive industries. The potential endogeneity of current civic capital is addressed by instrumenting it with historical variables. Our interpretation for these results is that civic capital is associated with reduced opportunistic behavior, which improves intra-firm cooperation and hampers the incidence of principal-agent problems, thus allowing plants to operate on a larger scale
Keywords: agency problems, civic capital, cooperation, opportunism, plant size distribution
JEL Classification: D23, Z13, L20, A13
Suggested Citation: Suggested Citation
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