Building upon the standard model of monopolistic competition on the market for intermediary goods, we propose a simple dynamical model of the formation of production networks  . The model subsumes the standard general equilibrium approach and robustly reproduces key stylized facts of firms' demographics. Firms' growth rates are negatively correlated with size and follow a core double-exponential distribution followed by fat tails. Firms' size and production network are power-law distributed. These properties emerge because continuous inflow of new firms shifts away the model from a steady state to a disequilibrium regime in which firms get scaled according to their resistance to competitive forces .
We propose a simple dynamical model of the formation of production networks among monopolistically competitive firms . The model subsumes the standard general equilibrium approach \`a la Arrow-Debreu but displays a wide set of potential dynamic behaviors. It robustly reproduces key stylized facts of firms' demographics. Our main result is that competition between intermediate good producers generically leads to the emergence of scale-free production networks .
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Building upon the standard model of monopolistic competition on the market for intermediary goods, we
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among monopolistically competitive firms
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\`a la Arrow-Debreu but displays a wide set of potential dynamic behaviors. It
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Firms' growth rates are negatively correlated with size and follow a core double-exponential distribution followed by fat tails. Firms' size and production network are power-law distributed. These properties emerge because continuous inflow of new firms shifts away the model from a steady state to a disequilibrium regime in which firms get scaled according to their resistance to competitive forces
Our main result is that competition between intermediate good producers generically leads to the emergence of scale-free production networks