Firm Dynamics in a Competitive Industry

33 Pages Posted: 6 Jun 2006

See all articles by Svetlana Boyarchenko

Svetlana Boyarchenko

University of Texas at Austin - Department of Economics

Date Written: June 2, 2006

Abstract

The paper demonstrates that basic empirical regularities concerning the dependence of firm dynamics on age and size can be naturally explained in a refined model of a competitive industry in Dixit and Pindyck (1996). In our model, all equity financed firms make entry, expansion, and exit decisions based on the level of idiosyncratic productivity shocks. Industry aggregates are non-random. We solve for the long-run equilibrium price of output and derive the stationary distribution of active firms.

Keywords: Exit and entry, size distribution, age distribution, industry dynamics

JEL Classification: C61, D81, E2, L16

Suggested Citation

Boyarchenko, Svetlana I., Firm Dynamics in a Competitive Industry (June 2, 2006). Available at SSRN: https://ssrn.com/abstract=906183 or http://dx.doi.org/10.2139/ssrn.906183

Svetlana I. Boyarchenko (Contact Author)

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

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