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Does classical competition explain the statistical features of firm growth?

Author

Listed:
  • Alfarano, Simone
  • Milakovic, Mishael

Abstract

We propose a statistical equilibrium model where the tendency for competition to equalize profit rates results in an exponential power (or Subbotin) distribution. The model supports and extends recent evidence on the Laplace distribution of firm growth rates.

Suggested Citation

  • Alfarano, Simone & Milakovic, Mishael, 2008. "Does classical competition explain the statistical features of firm growth?," Economics Letters, Elsevier, vol. 101(3), pages 272-274, December.
  • Handle: RePEc:eee:ecolet:v:101:y:2008:i:3:p:272-274
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    References listed on IDEAS

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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.
    2. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    3. Castaldi, Carolina & Milakovic, Mishael, 2007. "Turnover activity in wealth portfolios," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 537-552, July.
    4. S. V. Buldyrev & F. Pammolli & M. Riccaboni & K. Yamasaki & D.-F. Fu & K. Matia & H. E. Stanley, 2007. "A generalized preferential attachment model for business firms growth rates," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 57(2), pages 131-138, May.
    5. Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, vol. 80(3), pages 415-420, September.
    6. 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.
    7. Giulio Bottazzi & Angelo Secchi, 2006. "Explaining the distribution of firm growth rates," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 235-256, June.
    8. repec:rje:randje:v:37:y:2006:2:p:235-256 is not listed on IDEAS
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    More about this item

    Keywords

    Statistical equilibrium Classical competition Maximum entropy Profit rates Firm growth rates Subbotin distribution Laplace distribution;

    JEL classification:

    • F01 - International Economics - - General - - - Global Outlook
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions

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