Firm Size Dynamics in an Industrial District: The Mover-Stayer Model in Action

In the last decade, the District of Prato (an important industrial area in the neighborhood of Florence, Italy) suffered a deep shrinkage of exports and added value of the textile industry, the core of its economy. In this paper we aim to investigate if such a crisis entailed a firm downsizing (evaluated as number of employees) of the same industry and, possibly, of the overall economy of the District. For this purpose we use the Mover Stayer Model. Data are represented by two panels from ASIA-ISTAT data. The main results of the analysis are that: (1) the textile industry is affected by a relevant downsizing of the firm size; (2) such a process takes place through a slightly changed level of concentration; (3) the mentioned changes does not seem to spread to the overall economy.