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

## Author Info

• Fabio Pammolli
• Dongfeng Fu
• S. V. Buldyrev
• Massimo Riccaboni
• Kaushik Matia
• Kazuko Yamasaki
• H. E. Stanley
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## 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 $\zeta=3$. 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.

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File URL: http://arxiv.org/pdf/physics/0609011

## Bibliographic Info

Paper provided by arXiv.org in its series Papers with number physics/0609011.

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Handle: RePEc:arx:papers:physics/0609011

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## Related research

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Find related papers by JEL classification:
• D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
• L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
• E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
• L00 - Industrial Organization - - General - - - General
• L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
• L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
• L - Industrial Organization

## References

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1. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
2. L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
3. S. V. Buldyrev & L. A. N. Amaral & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: II. Modeling of company growth," Papers cond-mat/9702085, arXiv.org.
4. Kaushik Matia & Dongfeng Fu & Sergey V. Buldyrev & Fabio Pammolli & Massimo Riccaboni & H. Eugene Stanley, 2005. "Statistical Properties of Business Firms Structure and Growth," Papers physics/0502081, arXiv.org.
5. Giulio Bottazzi & Giovanni Dosi & Marco Lippi & Fabio Pammolli & Massimo Riccaboni, 2001. "Innovation and Corporate Growth in the Evolution of the Drug Industry," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2001/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
6. De Fabritiis, Gianni & Riccaboni, Massimo & Pammolli, Fabio, 2003. "On Size and Growth of Business Firms," MPRA Paper 15866, University Library of Munich, Germany.
7. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 739-767, August.
8. Canning, D. & Amaral, L. A. N. & Lee, Y. & Meyer, M. & Stanley, H. E., 1998. "Scaling the volatility of GDP growth rates," Economics Letters, Elsevier, Elsevier, vol. 60(3), pages 335-341, September.
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## Citations

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Cited by:
1. Joachim Kaldasch, 2012. "Evolutionary Model of the Personal Income Distribution," Papers 1203.6507, arXiv.org.
2. Yuichi Ikeda & Hideaki Aoyama & Hiroshi Iyetomi & Yoshi Fujiwara & Wataru Souma, 2008. "Correlated performance of firms in a transaction network," Journal of Economic Interaction and Coordination, Springer, Springer, vol. 3(1), pages 73-80, June.

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