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Bankruptcy as an exit mechanism for systems with a variable number of components

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Author Info

  • Delli Gatti, Domenico
  • Di Guilmi, Corrado
  • Gaffeo, Edoardo
  • Gallegati, Mauro

Abstract

Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the available evidence. We discuss a recently proposed macroeconomic model with random multiplicative shocks and a mechanism for exit based on bankruptcy, which displays several observed stylized facts for firms' dynamics, like power law distributions for firms' sizes and Laplace distributions for firms' growth rates.

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File URL: http://www.sciencedirect.com/science/article/pii/S0378437104008982
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Bibliographic Info

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

Volume (Year): 344 (2004)
Issue (Month): 1 ()
Pages: 8-13

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Handle: RePEc:eee:phsmap:v:344:y:2004:i:1:p:8-13

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

Related research

Keywords: Power law; Bankruptcy; Econophysics;

References

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  1. Matteo Richiardi, 2004. "Generalizing Gibrat: Reasonable Multiplicative Models of Firm Dynamics," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 7(1), pages 2.
  2. Reed, William J., 2001. "The Pareto, Zipf and other power laws," Economics Letters, Elsevier, vol. 74(1), pages 15-19, December.
  3. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
  4. Hideaki Aoyama & Yuichi Nagahara & Mitsuhiro P. Okazaki & Wataru Souma & Hideki Takayasu & Misako Takayasu, 2000. "Pareto's Law for Income of Individuals and Debt of Bankrupt Companies," Papers cond-mat/0006038, arXiv.org.
  5. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
  6. D. Delli Gatti & C. Di Guilmi & M. Gallegati & E. Gaffeo & G. Giulioni & A. Palestrini, 2008. "Scaling Laws In The Macroeconomy," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 131-138.
  7. Gaffeo, Edoardo & Gallegati, Mauro & Giulioni, Gianfranco & Palestrini, Antonio, 2003. "Power laws and macroeconomic fluctuations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 408-416.
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Citations

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Cited by:
  1. Gatti, Domenico Delli & Di Guilmi, Corrado & Gallegati, Mauro & Giulioni, Gianfranco, 2007. "Financial Fragility, Industrial Dynamics, And Business Fluctuations In An Agent-Based Model," Macroeconomic Dynamics, Cambridge University Press, vol. 11(S1), pages 62-79, November.
  2. 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.
  3. D. Delli Gatti & C. Di Guilmi & M. Gallegati & E. Gaffeo & G. Giulioni & A. Palestrini, 2008. "Scaling Laws In The Macroeconomy," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 131-138.
  4. Corrado DI GUILMI, 2008. "Financial Determinants of Firms Profitability: A Hazard Function Investigation," Working Papers 315, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  5. Pierpaolo Andriani & Bill McKelvey, 2007. "Beyond Gaussian averages: redirecting international business and management research toward extreme events and power laws," Journal of International Business Studies, Palgrave Macmillan, vol. 38(7), pages 1212-1230, December.
  6. Domenico Delli Gatti & Corrado Di Guilmi & Edoardo Gaffeo & Gianfranco Giulioni & Mauro Gallegati & Antonio Palestrini, 2004. "Business Cycle Fluctuations And Firms' Size Distribution Dynamics," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 223-240.

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