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

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

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Date of creation: Sep 2006
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Handle: RePEc:arx:papers:physics/0609011

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  1. Bottazzi, Giulio & Dosi, Giovanni & Lippi, Marco & Pammolli, Fabio & Riccaboni, Massimo, 2001. "Innovation and corporate growth in the evolution of the drug industry," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1161-1187, July. [Downloadable!] (restricted)
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  2. Canning, D. & Amaral, L. A. N. & Lee, Y. & Meyer, M. & Stanley, H. E., 1998. "Scaling the volatility of GDP growth rates," Economics Letters, Elsevier, vol. 60(3), pages 335-341, September. [Downloadable!] (restricted)
  3. De Fabritiis, Gianni & Riccaboni, Massimo & Pammolli, Fabio, 2003. "On Size and Growth of Business Firms," MPRA Paper 15866, University Library of Munich, Germany. [Downloadable!]
  4. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Quantitative Finance Papers cond-mat/9804100, arXiv.org. [Downloadable!]
  5. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August. [Downloadable!] (restricted)
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  1. 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, vol. 3(1), pages 73-80, June. [Downloadable!] (restricted)
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