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A stochastic analysis of firm dynamics: Their impact on the firm size distribution

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  • Reginster, Alexandre

Abstract

The Pareto distribution is known for its wide range of applications, including the distribution of firm sizes. Exhaustive databases on firm sizes showed deviations from the Pareto firm size distribution for the smallest and largest firm sizes. Therefore, stochastic models of firm dynamics reproducing a Pareto firm size distribution could be further generalized in order to also reproduce these deviations. Based on Córdoba (2008), we build a model of firm dynamics which can generate a wide variety of steady-state distributions and we make clear the relationship between the growth dynamics of the firms and the resulting shape of the firm size distribution. To the light of our model, we analyse the links between the observed firm dynamics and the shape of firm size distribution in Belgium between 2006 and 2013.

Suggested Citation

  • Reginster, Alexandre, 2021. "A stochastic analysis of firm dynamics: Their impact on the firm size distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 570(C).
    • Handle: RePEc:eee:phsmap:v:570:y:2021:i:c:s0378437121000893
    DOI: 10.1016/j.physa.2021.125817
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    References listed on IDEAS

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    Cited by:

    1. Arturo Ramos & Till Massing & Atushi Ishikawa & Shouji Fujimoto & Takayuki Mizuno, 2023. "Composite distributions in the social sciences: A comparative empirical study of firms' sales distribution for France, Germany, Italy, Japan, South Korea, and Spain," Papers 2301.09438, arXiv.org.

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    More about this item

    Keywords

    Firm size distribution; Firm dynamics; Steady-state; Pareto; Transition probabilities; Gibrat’s law;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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