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Power law distribution of the frequency of demises of US firms

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  • Cook, William
  • Ormerod, Paul
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    Abstract

    Both theoretical and applied economics have a great deal to say about many aspects of the firm, but the literature on the extinctions, or demises, of firms is very sparse. We use a publicly available data base covering some 6 million firms in the US and show that the underlying statistical distribution which characterises the frequency of firm demises—the disappearances of firms as autonomous entities—is closely approximated by a power law. The exponent of the power law is, intriguingly, close to that reported in the literature on the extinction of biological species.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378437102019556
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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 324 (2003)
    Issue (Month): 1 ()
    Pages: 207-212

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    Handle: RePEc:eee:phsmap:v:324:y:2003:i:1:p:207-212

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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    Cited by:
    1. Wright, Ian, 2009. "Implicit Microfoundations for Macroeconomics," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(19), pages 1-27.
    2. Bridget Rosewell & Paul Ormerod, 2004. "How much can firms know?," Computing in Economics and Finance 2004 44, Society for Computational Economics.
    3. Lavička, H. & Lin, L. & Novotný, J., 2010. "Employment, Production and Consumption model: Patterns of phase transitions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(8), pages 1708-1720.
    4. Guilmi, Corrado Di & Gallegati, Mauro & Ormerod, Paul, 2004. "Scaling invariant distributions of firms’ exit in OECD countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 334(1), pages 267-273.
    5. Kočišová, J. & Horváth, D. & Brutovský, B., 2009. "The efficiency of individual optimization in the conditions of competitive growth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(17), pages 3585-3592.

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