Although employment at individual firms tends to be highly non-stationary, the employment size distribution of all firms in the United States appears to be stationary. It closely resembles a Pareto distribution. There is a lot of entry and exit, mostly of small firms. This paper surveys general...

We consider an exchange economy with time-inconsistent consumers whose preferences are additively separable. When these consumers trade in a sequence of markets, their time-inconsistency may introduce a non-convexity that gives them an incentive to trade lotteries. If there are many consumers,...

Randomness in individual discovery tends to spread out productivities in a population, while learning from others keeps productivities together. In combination, these two mechanisms for knowledge accumulation give rise to long-term growth and persistent income inequality. This paper considers a...

Randomness in individual discovery disperses productivities, whereas learning from others keeps productivities together. Long-run growth and persistent earnings inequality emerge when these two mechanisms for knowledge accumulation are combined. This paper considers an economy in which those...

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...

The Pareto-like tail of the size distribution of firms can arise from random growth of productivity or stochastic accumulation of capital. If the shocks that give rise to firm growth are perfectly correlated within a firm, then the growth rates of small and large firms are equally volatile,...

This paper describes the equilibrium of a discrete-time exchange economy in which consumers with arbitrary subjective discount factors and homothetic period utility functions follow linear Markov consumption and portfolio strategies. Explicit expressions are given for state prices and...