We introduce a model of proportional growth to explain the distribution Pg(g) of business-firm growth rates. The model predicts that P g(g) is exponential 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. In this article, we test the model at different levels of aggregation in the economy, from products to firms to countries, and we find that the predictions of the model agree with empirical growth distributions and size-variance relationships.
The Growth of Business Firms: Theoretical Framework and Empirical Evidence / FU D; F. PAMMOLLI; S.V. BULDYREV; M. RICCABONI; K. YAMASAKI; K. MATIA; H.E. STANLEY. - In: PROCEEDINGS OF THE NATIONAL ACADEMY OF SCIENCES OF THE UNITED STATES OF AMERICA. - ISSN 0027-8424. - STAMPA. - 102:(2005), pp. 18801-18806.
The Growth of Business Firms: Theoretical Framework and Empirical Evidence
PAMMOLLI, FABIO;RICCABONI, MASSIMO;
2005
Abstract
We introduce a model of proportional growth to explain the distribution Pg(g) of business-firm growth rates. The model predicts that P g(g) is exponential 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. In this article, we test the model at different levels of aggregation in the economy, from products to firms to countries, and we find that the predictions of the model agree with empirical growth distributions and size-variance relationships.
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