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Power Law Distribution of the Frequency of Demises of U.S Firms

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  • William Cook
  • Paul Ormerod

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://arxiv.org/pdf/cond-mat/0212186
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Paper provided by arXiv.org in its series Papers with number cond-mat/0212186.

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Date of creation: Dec 2002
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Handle: RePEc:arx:papers:cond-mat/0212186

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Web page: http://arxiv.org/

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  1. Rational short-termism
    by chris dillow in Stumbling and Mumbling on 2013-03-06 14:23:55
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Cited by:
  1. Alex Coad, 2009. "Investigating the exponential age distribution of firms," Papers on Economics and Evolution 2009-23, Philipps University Marburg, Department of Geography.
  2. Wright, Ian, 2005. "The social architecture of capitalism," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 346(3), pages 589-620.
  3. Wright, Ian, 2008. "Implicit Microfoundations for Macroeconomics," Economics Discussion Papers, Kiel Institute for the World Economy 2008-41, Kiel Institute for the World Economy.
  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, Elsevier, vol. 334(1), pages 267-273.

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