We empirically characterize the sectoral distribution of firm size for a set of European countries, finding substantial differences in the size distribution within sectors. We then study the relationship between productivity growth at the sectoral level and size structure. We find a positive and robust association between average firm size and growth. We tackle the question of why size should matter for growth, considering the role of innovative activity, to construct a test based on the differential effect of size structure on growth according to different indicators of R&D intensity. Our results indicate that larger average size fosters productivity growth because it makes possible to take advantage of all the increasing returns associated with R&D. We finally argue that our test can be interpreted as a test of reverse causality, which lends support to the view of firm size having a causal impact on growth.

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In this paper we assess whether regional disparities in the euro area stimulate labour mobility, using migration behaviour in US states as a benchmark. Large regional disparities within European countries and size differences between them and US states led us to select regions as the appropriate unit of analysis for Europe. While the level of net immigration flows with respect to population is similar in the USA and the euro area, our study shows that its sensitivity to regional disparities differs considerably. Indeed, migration is much more significantly influenced by income disparities in the USA than it is in the Euro-11, both in the short and the long term. Furthermore, the responsiveness of net migration inflows to shocks to the relative unemployment rate is negative in the regions of the USA, but nil in those of the Euro-11. Finally, risk factors (identified in the theoretical model as the variance of income) are significant determinants of migration decisions in Europe but not in the USA.

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