A Generalized Preferential Attachment Model for Business Firms Growth Rates: I. Empirical Evidence

Pammolli, Fabio and Fu, Dongfeng and Buldyrev, Sergey V. and Riccaboni, Massimo and Matia, Kaushik and Yamasaki, Kazuko and Stanley, H. Eugene (2006): A Generalized Preferential Attachment Model for Business Firms Growth Rates: I. Empirical Evidence. Published in: The European Physical Journal B , Vol. 57, No. 2 (16 May 2007): pp. 127-130.

Abstract

We introduce a model of proportional growth to explain the distribution P(g) of business firm growth rates. The model predicts that P(g) is Laplace in the central part and depicts an asymptotic power-law behavior in the tails with an exponent ζ = 3. Because of data limitations, previous studies in this field have been focusing exclusively on the Laplace shape of the body of the distribution. We test the model at different levels of aggregation in the economy, from products, to firms, to countries, and we find that the its predictions are in good agreement with empirical evidence on both growth distributions and size-variance relationships.

• Item Type: MPRA Paper
• Language: English
• Keywords: Gibrat Law; Firm Growth; Size Distribution
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; E - Macroeconomics and Monetary Economics > E0 - General > E01 - Measurement and Data on National Income and Product Accounts and Wealth ; Environmental Accounts; L - Industrial Organization > L0 - General > L00 - General; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L65 - Chemicals ; Rubber ; Drugs ; Biotechnology; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation: Models and Applications

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