Selection , Growth and the Size Distribution of Firms

  title={Selection , Growth and the Size Distribution of Firms},
  author={Erzo G. J. Luttmer},
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… CONTINUE READING
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