Are we missing something? The missing-middle phenomena

There is a widely accepted notion in the literature that suggests that the industrial structures of the developing countries is characterized by a bimodal distribution with a missing-middle, a term used to refer to the low level of small and medium-sized firms compared to the total number of firms. The purpose of this study is to investigate not only whether the distribution of Costa Rican firms is characterized by the bimodality proposed by the missing middle hypothesis, but also how the total number of firms by size is affected by the same business economic conditions. This is done in an empirical study that uses a bimodality coefficient test in conjunction with panel data estimation using fixed effects. Overall the results shows that contrary to the hypothesis proposed by the literature for the Costa Rican case, the firm size distribution is not characterized by a missing middle, what is observed from the data is, in fact, that the firm size distribution is skewed to the right. Likewise, the results suggest that in fact factors of the business economic environment related to competitiveness and institutional aspects are affecting medium-sized firms.