The firm size distribution across countries and skill-biased change in entrepreneurial technology

How and why does the firm size distribution differ across countries? This paper documents that features of the firm size distribution are strongly associated with in-come per capita. Richer countries have fewer entrepreneurs and fewer small firms. The average, dispersion and skewness of firm size are all larger in richer countries. A simple general equilibrium model of occupational choice with skill-biased change in entrepreneurial technology calibrated to U.S. data can account very well for these pat-terns. The crucial assumption is that some entrepreneurs benefit more from technolog-ical progress than others. Marginal entrepreneurs then switch to becoming employees as technology advances