Graduate Center Masterclasses

This masterclass focuses on recent theoretical advances that incorporate firm heterogeneity into endogenous growth models. Traditional macroeconomic analyses often simplify firm characteristics by using representative-agent frameworks, overlooking significant firm-level differences in productivity, innovation, market power, and pricing decisions. However, empirical analysis of important macroeconomic facts underlines the importance of a small number of “superstar firms” that grow faster and have higher market power.

This class reviews current models that explicitly account for such heterogeneity, emphasizing the role of varying markups and market power in shaping macroeconomic outcomes. Special attention is given to the issue of misallocation, where distortions due to heterogeneous firm behaviors affect resource allocation efficiency, productivity growth, and aggregate economic performance.

Participants will examine both theoretical frameworks and how they are motivated by empirical facts that illustrate how incorporating firm-specific dynamics into macroeconomic models enhances understanding of economic growth mechanisms and market imperfections.