IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

A Unified Theory of Firm Selection and Growth

  • Costas Arkolakis

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w17553.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17553.

as
in new window

Length:
Date of creation: Oct 2011
Date of revision:
Publication status: published as Costas Arkolakis, 2016. "A Unified Theory of Firm Selection and Growth," The Quarterly Journal of Economics, vol 131(1), pages 89-155.
Handle: RePEc:nbr:nberwo:17553
Note: EFG IO ITI
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  2. An, Mark Yuying, 1995. "Logconcavity versus Logconvexity: A Complete Characterization," Working Papers 95-03, Duke University, Department of Economics.
  3. Rasmus Lentz & Dale T. Mortensen, 2008. "An Empirical Model of Growth Through Product Innovation," Econometrica, Econometric Society, vol. 76(6), pages 1317-1373, November.
  4. Christian Broda & David E. Weinstein, 2004. "Globalization and the Gains from Variety," NBER Working Papers 10314, National Bureau of Economic Research, Inc.
  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  6. Facundo Albornoz & Hector Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential Exporting," CEP Discussion Papers dp0974, Centre for Economic Performance, LSE.
  7. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151 - 1199.
  8. Steven J. Davis & John Haltiwanger & Ron S. Jarmin & C. J. Krizan & Javier Miranda & Alfred Nucci & Kristin Sandusky, 2007. "Measuring the Dynamics of Young and Small Businesses: Integrating the Employer and Nonemployer Universes," NBER Working Papers 13226, National Bureau of Economic Research, Inc.
  9. George Alessandria & Horag Choi, 2011. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Working Papers 11-19, Federal Reserve Bank of Philadelphia.
  10. repec:stn:sotoec:1003 is not listed on IDEAS
  11. Abbring, Jaap H. & Campbell, Jeffrey R., 2003. "A Structural Empirical Model of Firm Growth, Learning, and Survival," IZA Discussion Papers 781, Institute for the Study of Labor (IZA).
  12. Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum 02/2002, Oslo University, Department of Economics.
  13. Jaromir B. Nosal & Lukasz A. Drozd, 2010. "Understanding International Prices: Customers as Capital," 2010 Meeting Papers 1027, Society for Economic Dynamics.
  14. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
  15. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  16. Costas Arkolakis & Sharat Ganapati & Marc-Andreas Muendler, 2016. "The Extensive Margin of Exporting Products: A Firm-level Analysis," Cowles Foundation Discussion Papers 2028, Cowles Foundation for Research in Economics, Yale University.
  17. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1103-1144.
  18. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August.
  19. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," Working Papers 10-17, Center for Economic Studies, U.S. Census Bureau.
  20. Theodore Papageorgiou, 2014. "Learning Your Comparative Advantages," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1263-1295.
  21. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
  22. L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
  23. Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andrés Rodríguez-Clare, 2008. "Endogenous Variety and the Gains from Trade," NBER Working Papers 13933, National Bureau of Economic Research, Inc.
  24. François Gourio & Leena Rudanko, 2014. "Customer Capital," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1102-1136.
  25. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  26. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
  27. Yan Bai & Jing Zhang & Cristina Arellano, 2009. "Firm Dynamics and Financial Development," 2009 Meeting Papers 152, Society for Economic Dynamics.
  28. Eaton, Jonathan & Kortum, Samuel S & Kramarz, Francis, 2009. "An Anatomy of International Trade: Evidence from French Firms," CEPR Discussion Papers 7111, C.E.P.R. Discussion Papers.
  29. Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-52, September.
  30. Natalie Chen & Dennis Novy, 2009. "International Trade Integration: A Disaggregated Approach," CESifo Working Paper Series 2595, CESifo Group Munich.
  31. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  32. Reed, William J., 2001. "The Pareto, Zipf and other power laws," Economics Letters, Elsevier, vol. 74(1), pages 15-19, December.
  33. Xavier Gabaix, 1999. "Zipf's Law for Cities: An Explanation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 739-767.
  34. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
  35. William J. Reed, 2002. "On the Rank-Size Distribution for Human Settlements," Journal of Regional Science, Wiley Blackwell, vol. 42(1), pages 1-17.
  36. Willis, Jonathan L. & Ruhl, Kim J., 2014. "New exporter dynamics," Research Working Paper RWP 14-10, Federal Reserve Bank of Kansas City.
  37. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  38. Alfonso A. Irarrazabal & Luca David Opromolla, 2009. "The Cross Sectional Dynamics of Heterogenous Trade Models," Working Papers w200924, Banco de Portugal, Economics and Research Department.
  39. Impullitti, Giammario & Irarrazabal, Alfonso A. & Opromolla, Luca David, 2013. "A theory of entry into and exit from export markets," Journal of International Economics, Elsevier, vol. 90(1), pages 75-90.
  40. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  41. Joaquim Oliveira Martins & Stefano Scarpetta & Dirk Pilat, 1996. "Mark-Up Ratios in Manufacturing Industries: Estimates for 14 OECD Countries," OECD Economics Department Working Papers 162, OECD Publishing.
  42. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  43. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Establishment size dynamics in the aggregate economy," Staff Report 382, Federal Reserve Bank of Minneapolis.
  44. Danielken Molina & Marc-Andreas Muendler, 2013. "Preparing to Export," NBER Working Papers 18962, National Bureau of Economic Research, Inc.
  45. Luca David Opromolla & Alfonso Irarrazabal, 2005. "Hysteresis in Export Markets," International Trade 0512003, EconWPA.
  46. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  47. Thomas F. Cooley & Vincenzo Quadrini, 2001. "Financial Markets and Firm Dynamics," American Economic Review, American Economic Association, vol. 91(5), pages 1286-1310, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17553. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.