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Firm Entry and Exit with Unbounded Productivity Growth

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  • John Stachurski

Abstract

In Hopenhayn's (1992) entry-exit model productivity is bounded, implying that the predicted firm size distribution cannot match the power law tail observable in the data. In this paper we remove the boundedness assumption and, in this more general setting, provide an exact characterization of existence of stationary equilibria, as well as a novel sufficient condition for existence based on treating production as a Lyapunov function. We also provide new representations of the rate of entry and aggregate supply. Finally, we prove that the firm size distribution has a power law tail under a very broad set of productivity growth specifications.

Suggested Citation

  • John Stachurski, 2019. "Firm Entry and Exit with Unbounded Productivity Growth," Papers 1910.14023, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:1910.14023
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    Cited by:

    1. Petra Štamfestová & Lukáš Sobíšek & Jiří Hnilica, 2023. "Firm Size Distribution in the Central European Context," Central European Business Review, Prague University of Economics and Business, vol. 2023(5), pages 151-175.

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