Models of firm heterogeneity and growth

Erzo Luttmer

No 678, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Although employment at individual firms tends to be highly non-stationary, the employment size distribution of all firms in the United States appears to be stationary. It closely resembles a Pareto distribution. There is a lot of entry and exit, mostly of small firms. This paper surveys general equilibrium models that can be used to interpret these facts and explores the role of innovation by new and incumbent firms in determining aggregate growth. The existence of a balanced growth path with a stationary employment size distribution depends crucially on assumptions made about the cost of entry. Some type of labor must be an essential input in setting up new firms.

Keywords: Productivity (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cse, nep-dge, nep-ent and nep-tid
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:678

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