A model for scaling in firms' size and growth rate distribution

Authored by Cornelia Metzig, Mirta B. Gordon

Date Published: 2014-03-15

DOI: 10.1016/j.physa.2013.11.027

Sponsors: No sponsors listed

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Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

We introduce a simple agent-based model which allows us to analyze three stylized facts: a fat-tailed size distribution of companies, a `tent-shaped' growth rate distribution, the scaling relation of the growth rate variance with firm size, and the causality between them. This is achieved under the simple hypothesis that firms compete for a scarce quantity (either aggregate demand or workforce) which is allocated probabilistically. The model allows us to relate size and growth rate distributions. We compare the results of our model to simulations with other scaling relationships, and to similar models and relate it to existing theory. Effects arising from binning data are discussed. (C) 2013 Elsevier B.V. All rights reserved.

Tags

Power-law distribution Firm growth Growth process Heavy-tailed distribution Superstatistics Tent-shape