Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Old firms and the relationship between age and size
Using Danish administrative data on firms aged 0-65, we study the relationship between size and age. In the cross-section, average size increases with age. However, exploiting the panel structure through fixed-effects estimation or a partial identification approach to the so-called age-period-cohort problem, we find evidence that firm size increases with age only for the first 10-15 years and falls after that. Moreover, sample composition effects appear to play a significant role in explaining the patterns observed in the cross-: We find significant differences in exit rates by firm size and strong cohort effects for firms entering in the late 1950s. We also find that the exit rate is not monotonically decreasing with age.