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 potential entrants. The empirical...

Suppose firms are subject to decreasing returns and permanent idiosyncratic productivity shocks. Suppose also firms can only stay in business by continuously paying a fixed cost. New firms can enter. Firms with a history of relatively good productivity shocks tend to survive and others are...