Advanced Search
MyIDEAS: Login

A look at the relationship between industrial dynamics and aggregate fluctuations

Contents:

Author Info

  • Domenico Delli Gatti
  • Edoardo Gaffeo

    ()

  • Mauro Gallegati

Abstract

The firmly established evidence of right-skewness of the firms’ size distribution is generally modelled recurring to some variant of the Gibrat’s Law of Proportional Effects. In spite of its empirical success, this approach has been harshly criticized on a theoretical ground due to its lack of economic contents and its unpleasant long-run implications. In this chapter we show that a right-skewed firms’ size distribution, with its upper tail scaling down as a power law, arises naturally from a simple choice-theoretic model based on financial market imperfections and a wage setting relationship. Our results rest on a multi-agent generalization of the prey-predator model, firstly introduced into economics by Richard Goodwin forty years ago.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.unitn.it/files/3_08_gaffeo.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0803.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:trn:utwpde:0803

Contact details of provider:
Postal: Via Inama 5, 38100 Trento
Phone: +39-461-882201
Fax: +39-461-882222
Web page: http://www.unitn.it/deco
More information through EDIRC

Related research

Keywords: Firm size; Prey-predator model; Business Fluctuations;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Delli Gatti, Domenico & Gallegati, Mauro, 1996. "Financial Market Imperfections and Irregular Growth Cycles," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(2), pages 146-58, May.
  2. Geroski, Paul A & Samiei, Hossein & Urga, Giovanni, 1997. "Are Differences in Firm Size Transitory or Permanent?," CEPR Discussion Papers 1691, C.E.P.R. Discussion Papers.
  3. Klette, Tor Jakob & Kortum, Samuel S, 2002. "Innovating Firms and Aggregate Innovation," CEPR Discussion Papers 3248, C.E.P.R. Discussion Papers.
  4. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
  5. Amy Finkelstein & James Poterba, 2000. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," NBER Working Papers 8045, National Bureau of Economic Research, Inc.
  6. Lu�s M B Cabral & Jos� Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
  7. Kaplan, Steven N. & Reishus, David, 1990. "Outside directorships and corporate performance," Journal of Financial Economics, Elsevier, vol. 27(2), pages 389-410, October.
  8. Baumol, William J & Benhabib, Jess, 1989. "Chaos: Significance, Mechanism, and Economic Applications," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 77-105, Winter.
  9. Greenwald, Bruce C & Stiglitz, Joseph E, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 77-114, February.
  10. Giulio Bottazzi & Angelo Secchi, 2003. "Common Properties and Sectoral Specificities in the Dynamics of U.S. Manufacturing Companies," Review of Industrial Organization, Springer, vol. 23(3_4), pages 217-232, December.
  11. Hammar, Henrik & Johansson-Stenman, Olof, 2001. "The Value Of Risk - Free Cigarettes - Do Smokers Underestimate The Risk?," Working Papers in Economics 61, University of Gothenburg, Department of Economics.
  12. Marco Gelderen & Roy Thurik & Niels Bosma, 2006. "Success and Risk Factors in the Pre-Startup Phase," Small Business Economics, Springer, vol. 26(4), pages 319-335, 05.
  13. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  14. 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.
  15. Lindbeck, Assar, 1992. "Macroeconomic theory and the labor market," European Economic Review, Elsevier, vol. 36(2-3), pages 209-235, April.
  16. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  17. Higson, C. & Holly, S. & Kattuman, P. & S. Platis, 2001. "The Business Cycle, Macroeconomic Shocks and the Cross Section: The Growth of UK Quoted Companies," Cambridge Working Papers in Economics 0114, Faculty of Economics, University of Cambridge.
  18. Choe, Hyuk & Masulis, Ronald W. & Nanda, Vikram, 1993. "Common stock offerings across the business cycle : Theory and evidence," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 3-31, June.
  19. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  20. Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-89, September.
  21. Lundborg, Petter & Lindgren, Bjorn, 2002. " Risk Perceptions and Alcohol Consumption among Young People," Journal of Risk and Uncertainty, Springer, vol. 25(2), pages 165-83, September.
  22. Hart, Peter E & Oulton, Nicholas, 2001. "Galtonian Regression, Company Age and Job Generation 1986-95," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(1), pages 82-98, February.
  23. Gilson, Stuart C., 1990. "Bankruptcy, boards, banks, and blockholders : Evidence on changes in corporate ownership and control when firms default," Journal of Financial Economics, Elsevier, vol. 27(2), pages 355-387, October.
  24. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:trn:utwpde:0803. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luciano Andreozzi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.