A Generalized Preferential Attachment Model for Business Firms Growth Rates: II. Mathematical Treatment
We present a preferential attachment growth model to obtain the distribution P(K) of number of units K in the classes which may represent business firms or other socio-economic entities. We found that P(K) is described in its central part by a power law with an exponent φ = 2+b/(1−b) which depends on the probability of entry of new classes, b. In a particular problem of city population this distribution is equivalent to the well known Zipf law. In the absence of the new classes entry, the distribution P(K) is exponential. Using analytical form of P(K) and assuming proportional growth for units, we derive P(g), the distribution of business firm growth rates. The model predicts that P(g) has a Laplacian cusp in the central part and asymptotic power-law tails with an exponent ζ = 3. We test the analytical expressions derived using heuristic arguments by simulations. The model might also explain the size-variance relationship of the firm growth rates.
|Date of creation:||31 Aug 2006|
|Date of revision:|
|Publication status:||Published in The European Physical Journal B 2.57(2007): pp. 131-138|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
- 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.
- Buldyrev, S.V & Dokholyan, N.V & Erramilli, S & Hong, M & Kim, J.Y & Malescio, G & Stanley, H.E, 2003. "Hierarchy in social organization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 330(3), pages 653-659.
- De Fabritiis, G. & Pammolli, F. & Riccaboni, M., 2003.
"On size and growth of business firms,"
Physica A: Statistical Mechanics and its Applications,
Elsevier, vol. 324(1), pages 38-44.
- S. V. Buldyrev & L. A. N. Amaral & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: II. Modeling of company growth," Papers cond-mat/9702085, arXiv.org.
- Yamasaki, Kazuko & Matia, Kaushik & Buldyrev, Sergey V. & Fu, Dongfeng & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2004. "Preferential attachment and growth dynamics in complex systems," MPRA Paper 15908, University Library of Munich, Germany, revised 06 Feb 2006.
- Hall, Bronwyn H, 1987.
"The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 35(4), pages 583-606, June.
- Bronwyn H. Hall, 1986. "The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector," NBER Working Papers 1965, National Bureau of Economic Research, Inc.
- Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, vol. 70, pages 556.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:15980. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.