Selection, Growth, and the Size Distribution of Firms

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ID: 302519
2007
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Abstract
This paper describes an analytically tractable model of balanced growth that is consistent with the observed size distribution of firms.Growth is the result of idiosyncratic firm productivity improvements, selection of successful firms, and imitation by entrants.Selection tends to improve aggregate productivity at a fast rate if entry and imitation are easy.The empirical phenomenon of Zipf 's law can be interpreted to mean that entry costs are high or that imitation is difficult, or both.The small size of entrants indicates that imitation must be difficult.A calibration based on U. S. data suggests that about half of output growth can be attributed to selection.But the implied variance of the combined preference and technology shocks is puzzlingly high.
Reference Key
openalex_W2038002035 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Erzo G. J. Luttmer
Journal the quarterly journal of economics
Year 2007
DOI
10.1162/qjec.122.3.1103
URL
https://doi.org/10.1162/qjec.122.3.1103
Keywords Keywords not found

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