| Abstract |
Existing explanations of Zipf's law (Pareto exponent approximately equal to 1) in size distributions require strong assumptions on growth rates or the minimum size. I show that Zipf's law naturally arises in general equilibrium when individual units operate a constant-returns-to-scale technology with multiple inputs, one of which is in inelastic supply. My model explains why Zipf's law is empirically observed in the size distributions of cities and firms, which consist of people, but not in other quantities such as wealth, income, or consumption. |