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A generalized preferential attachment model for business firms growth rates

Author

Listed:
  • F. Pammolli

    ()

  • D. Fu

    ()

  • S. V. Buldyrev

    ()

  • M. Riccaboni

    ()

  • K. Matia

    ()

  • K. Yamasaki

    ()

  • H. E. Stanley

    ()

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 predictions are in good agreement with empirical evidence on both growth distributions and size-variance relationships. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2007

Suggested Citation

  • F. Pammolli & D. Fu & S. V. Buldyrev & M. Riccaboni & K. Matia & K. Yamasaki & 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 127-130, May.
  • Handle: RePEc:spr:eurphb:v:57:y:2007:i:2:p:127-130
    DOI: 10.1140/epjb/e2007-00133-4
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    Cited by:

    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;Society for Economic Science with Heterogeneous Interacting Agents, vol. 3(1), pages 73-80, June.
    2. 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.
    3. Kaldasch, Joachim, 2012. "Evolutionary model of the personal income distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5628-5642.
    4. Hisano, Ryohei & Mizuno, Takayuki, 2011. "Sales distribution of consumer electronics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(2), pages 309-318.
    5. Alfarano, Simone & Milaković, Mishael & Irle, Albrecht & Kauschke, Jonas, 2012. "A statistical equilibrium model of competitive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 136-149.
    6. Wagner, Friedrich & Milaković, Mishael & Alfarano, Simone, 2010. "Firm profitability and the network of organizational capabilities," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4769-4775.
    7. ARATA Yoshiyuki, 2014. "Firm Growth and Laplace Distribution: The importance of large jumps," Discussion papers 14033, Research Institute of Economy, Trade and Industry (RIETI).
    8. repec:eee:phsmap:v:481:y:2017:i:c:p:265-275 is not listed on IDEAS
    9. Bee, Marco & Riccaboni, Massimo & Schiavo, Stefano, 2017. "Where Gibrat meets Zipf: Scale and scope of French firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 481(C), pages 265-275.

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