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Trade and the size distribution of firms: Evidence from the German Empire

Marcus Biermann ORCID logo
From the journal German Economic Review

Abstract

What effect did trade have on the size distribution of firms during the first wave of globalization? Three historical datasets from the German Empire between 1875 and 1907 were collected and harmonized to answer this question. This paper combines industry census and bilateral railway trade data from the same industry and region along with industry-level tariff data. The evidence shows that increases in aggregate trade caused the share of firms to shift from smaller to larger firms. Exogenous decreases in tariffs caused an increase in the share of the largest firms. The regional distributive effects of trade on inequality between firms that are discussed in the contemporaneous literature were already present during the first wave globalization.

JEL Classification: F14; F15; N73

Funding source: Studienstiftung des Deutschen Volkes

Funding statement: Financial support by the German National Academic Foundation is gratefully acknowledged.

Acknowledgment

I thank Mario Larch, two anonymous referees as well as Facundo Albornoz, Swati Dhingra, Basile Grassi, Hanwei Huang, Elsa Leromain, Stephan Maurer, Gianmarco Ottaviano, Frank Pisch, Steve Pischke, Thomas Sampson, Daniel Sturm, Jens Südekum, Jacques Thisse, Catherine Thomas, Hans-Joachim Voth and participants of the CEP International Economics Workshop, Frankfurt EGIT, 15th GEP Annual Postgraduate Conference Nottingham, 16th Trans-Atlantic Doctoral Conference LBS, the Urban Economics Association Summer School at the IEC in Barcelona, Annual congress Verein für Socialpolitik in Augsburg 2016, 18th ETSG in Helsinki, Econometric Society Winter Meeting in Edinburgh 2016 for helpful comments and discussions.

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Supplemental Material

The online version of this article offers supplementary material (https://doi.org/10.1515/ger-2020-0048).


Published Online: 2021-01-21
Published in Print: 2021-08-10

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