Models of Growth and Firm Heterogeneity

Erzo Luttmer

No 2010-1, Working Papers from University of Minnesota, Department of Economics

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: firm size distribution; organization capital; heterogeneous productivity; selection. (search for similar items in EconPapers)
JEL-codes: L1 O4 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2010
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dge, nep-eff, nep-ent, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

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Journal Article: Models of Growth and Firm Heterogeneity (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:min:wpaper:2010-1

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