We examine a model of the size distribution and growth of firms whereby firms learn about idiosyncratic productivity parameters. Aggregate shocks, by adding noise to learning at the firm level, can produce differentiated response across firms with their reactions depending on the position of the...

A considerable body of evidence suggests differences between large and small firms in financial and investment behavior. Many observers have taken this evidence to suggest the existence of market imperfections that put small firms at a disadvantage in raising capital. This “market failure”...

Previous research indicates that the differences between large and small firms should be more pronounced during economic down turns. However, although many studies have emphasized equilibrium models with heterogeneous firms and financial frictions, little research has focused on the separate...