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Regional resilience and fat tails: A stochastic analysis of firm growth rate distributions of German regions

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  • Matthias Duschl

    (Section Economic Geography and Location Research, Philipps-University, Marburg)

Abstract

This paper breaks down the distributional analysis of firm growth rates to the domain of regions. Extreme growth events, i.e. fat tails, are conceptualized as an indicator of competitive regional environments which enable processes like structural adaptation or technological re-orientation. An understanding of the heterogeneous dynamics at the level of firms, the “turbulence underneath the big calm†(Dosi et al. 2012), provides a micro-funded empirical perspective on the evolutionary dimension of regional resilience. Therefore, the flexible Asymmetric Exponential Power (AEP) density is fitted to firm data for each German region during the years of economic downturn (2008-2010). Peculiarities of employment growth are explicitly taken into account by applying a new maximum likelihood estimation procedure with order statistics (Bottazzi 2012). The estimated parameters, which measure the tails’ fatness, are then related to various region-specific factors that are discussed in the literature on regional resilience. Results show that firm growth rate distributions remain asymmetric and fat tailed at the spatially disaggregated level, but their shape markedly differ across regions. Extreme growth events, i.e. firm-level turbulences, are primarily a phenomenon of economically better performing regions at the aggregate level and further intensified by the presence of a higher qualified workforce. Besides, the fatness of the tails depends on the regions’ industrial structure.

Suggested Citation

  • Matthias Duschl, 2014. "Regional resilience and fat tails: A stochastic analysis of firm growth rate distributions of German regions," Working Papers on Innovation and Space 2014-01, Philipps University Marburg, Department of Geography.
  • Handle: RePEc:pum:wpaper:2014-01
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    References listed on IDEAS

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    Cited by:

    1. Matthias Duschl & Shi-Shu Peng, 2013. "Chinese firm dynamics and the role of ownership type A conditional estimation approach of the Asymmetric Exponential Power (AEP) density," Papers on Economics and Evolution 2014-01, Philipps University Marburg, Department of Geography.
    2. Franziska Pudelko & Christian Hundt, 2017. "Gauging two sides of regional economic resilience in Western Germany. Why resitance and recovery should not be lumped together," Working Papers on Innovation and Space 2017-01, Philipps University Marburg, Department of Geography.

    More about this item

    Keywords

    regional resilience; firm growth; growth rates distributions; fat tails; asymmetric exponential power; evolutionary perspective;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions

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