The European Size Distribution of Firms and Employment

In recent years, policy debate has increasingly focused on the issues concerning size distribution of firms and employment. It is often claimed that we are approaching a new economic era, where large enterprises have lost their importance in developed economies. This raises the question as how the size distributions can be explained on basis of currently available European data. An attempt is made in this paper to examine the availability and reliability of European data related to the size distribution of firms and employment. The study suggests that though the existing data is severely limited in a number of respects, quality of statistics on employment and firm size structure has improved over time. On the basis of existing data the author has analyzed differences in the size distribution of firms and employment between countries and across time. The study illustrates that enterprises employing less than 250 people account for about 2/3 of total employment. Countries in the Southern part of the EU in general have a higher share of micro enterprises as well as a higher share of individuals employed in the micro enterprises, compared to the other countries in the EU. This difference is explained in terms of a higher share of micro enterprises within most NACE sections. Some of the differences are explained by the industry distribution of employment. The available data also shows a small increase in employment among micro enterprises since 1990.