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A conjecture on the distribution of firm profit

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  • Ian Wright

Abstract

A common assumption of political economy is that profit rates across firms or sectors tend to uniformity, and often models are formulated in which this tendency is assumed to have been realised. But in reality this tendency is never realised and the distribution of firm profits is not degenerate but skewed to the right. The mode is less than the mean and super-profits are present. To understand the distribution of firm profits a general probabilistic argument is sketched that yields a candidate functional form. The overall properties of the derived distribution are qualitatively consistent with empirical measures, although there is more work to be done.

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File URL: http://arxiv.org/pdf/cond-mat/0407687
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Bibliographic Info

Paper provided by arXiv.org in its series Papers with number cond-mat/0407687.

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Date of creation: Jul 2004
Date of revision: Mar 2011
Handle: RePEc:arx:papers:cond-mat/0407687

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Web page: http://arxiv.org/

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  1. Gaffeo, Edoardo & Gallegati, Mauro & Palestrini, Antonio, 2003. "On the size distribution of firms: additional evidence from the G7 countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 117-123.
  2. Yoshi Fujiwara & Corrado Di Guilmi & Hideaki Aoyama & Mauro Gallegati & Wataru Souma, 2003. "Do Pareto-Zipf and Gibrat laws hold true? An analysis with European Firms," Papers cond-mat/0310061, arXiv.org, revised Nov 2003.
  3. Wright, Ian, 2005. "The social architecture of capitalism," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 346(3), pages 589-620.
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Cited by:
  1. Wright, Ian, 2008. "Implicit Microfoundations for Macroeconomics," Economics Discussion Papers 2008-41, Kiel Institute for the World Economy.

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