A Unified Theory of Firm Selection and Growth

Costas Arkolakis

No 17553, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the effects of marketing choice to firm growth. I assume that firm-level growth is the result of idiosyncratic productivity improvements with continuous arrival of new potential producers. A firm enters a market if it is profitable to incur the marginal cost to reach the first consumer and pays an increasing marketing cost to reach additional consumers. The model is calibrated using data on the cross-section of firms and their sales across markets as well as the rate of incumbent firm-exit. The calibrated model quantitatively predicts firm exit, growth, and the resulting firm size distribution in the US manufacturing data. It also predicts a distribution of firm growth rates that deviates from Gibrat's law -i.e. independence of firm size and growth- in a manner consistent with the data.

JEL-codes: F12 L11 L16 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-bec
Note: EFG IO ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Published as Costas Arkolakis, 2016. "A Unified Theory of Firm Selection and Growth," The Quarterly Journal of Economics, vol 131(1), pages 89-155.

Downloads: (external link)
http://www.nber.org/papers/w17553.pdf (application/pdf)

Related works:
Journal Article: A Unified Theory of Firm Selection and Growth (2016)
Working Paper: A Unified Theory of Firm Selection and Growth (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17553

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17553

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().