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

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Author Info
Pammolli, Fabio
Fu, Dongfeng
Buldyrev, Sergey V.
Riccaboni, Massimo
Matia, Kaushik
Yamasaki, Kazuko
Stanley, H. Eugene

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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 ζ = 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://mpra.ub.uni-muenchen.de/15983/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15983.

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Date of creation: 31 Aug 2006
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Publication status: Published in The European Physical Journal B 2.57(2007): pp. 127-130
Handle: RePEc:pra:mprapa:15983

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Related research
Keywords: Gibrat Law; Firm Growth; Size Distribution;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
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
L00 - Industrial Organization - - General - - - General
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. 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)
  2. De Fabritiis, Gianni & Riccaboni, Massimo & Pammolli, Fabio, 2003. "On Size and Growth of Business Firms," MPRA Paper 15866, University Library of Munich, Germany. [Downloadable!]
  3. 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!]
  4. 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)
  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 2001/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
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Cited by:
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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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