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Given a common technology for replicating blueprints, high-quality blueprints will be replicated more quickly than low-quality blueprints. If quality begets quality, and firms are identified with collections of blueprints derived from the same initial blueprint, then, along a balanced growth path, Gibrat's Law holds for every type of firm. A firm size distribution with the thick right tail observed in the data can then arise only when the number of blueprints in the economy grows over time, or else firms cannot grow at a positive rate on average. But when calibrated to match the observed firm entry rate and the right tail of the size distribution, this model implies that the median age among firms with more than 10,000 employees is about 750 years. The problem is Gibrat's Law. If the relative quality of a firm's blueprints depreciates as the firm ages, then the firm's growth rate slows down over time. By allowing for rapid and noisy initial growth, this version of the model can explain high observed entry rates, a thick-tailed size distribution, and the relatively young age of large U.S. corporations.
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1
On the mechanics of firm growth
2008, Federal Reserve Bank of Minneapolis, Research Dept.
Electronic resource
in English
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Book Details
Edition Notes
Title from PDF file (viewed on Oct. 10, 2008).
"February 2008."
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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- Created December 4, 2008
- 4 revisions
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December 22, 2020 | Edited by MARC Bot | import existing book |
July 29, 2012 | Edited by VacuumBot | Updated format '[electronic resource] /' to 'Electronic resource' |
December 15, 2009 | Edited by WorkBot | link works |
December 4, 2008 | Created by ImportBot | Imported from Library of Congress MARC record |