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Firm Growth and Selection in a Finite Economy

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  • Staley, Mark

Abstract

A model of firm dynamics is presented in which the growth rate of knowledge capital is linked to productivity, and productivity fluctuates randomly. The distribution of productivity forms a stable traveling wave, representing a growing economy. Granularity is maintained by way of spinoffs, resulting in a firm size distribution that rapidly approaches the Zipf distribution. An unexpected consequence of the model is that the growth rate is proportional to the log of the number of firms. The model also implies that specialization is positive for growth.

Suggested Citation

  • Staley, Mark, 2015. "Firm Growth and Selection in a Finite Economy," MPRA Paper 67291, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:67291
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    References listed on IDEAS

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    More about this item

    Keywords

    Growth; Ideas; Selection; Scale effect;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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