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On the robustness of the fat-tailed distribution of firm growth rates: a global sensitivity analysis

Author

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  • Giovanni Dosi
  • Marcelo C. Pereira
  • Maria Enrica Virgillito

Abstract

Firms grow and decline by relatively lumpy jumps which cannot be accounted by the cumulation of small, 'atom-less', independent shocks. Rather 'big' episodes of expansion and contraction are relatively frequent. More technically, this is revealed by fat tail distributions of growth rates. This applies across different levels of sectoral disaggregation, across countries, over different historical periods for which there are available data. What determines such property? In Dosi et al. (2015) we implemented a simple multi-firm evolutionary simulation model, built upon the coupling of a replicator dynamic and an idiosyncratic learning process, which turns out to be able to robustly reproduce such a stylized fact. Here, we investigate, by means of a Kriging meta-model, how robust such 'ubiquitousness' feature is with regard to a global exploration of the parameters space. The exercise confirms the high level of generality of the results in a statistically robust global sensitivity analysis framework.

Suggested Citation

  • Giovanni Dosi & Marcelo C. Pereira & Maria Enrica Virgillito, 2016. "On the robustness of the fat-tailed distribution of firm growth rates: a global sensitivity analysis," LEM Papers Series 2016/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2016/12
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    More about this item

    Keywords

    Firm Growth Rates; Fat Tail Distributions; Kriging Meta-Modeling; Near-Orthogonal Latin Hypercubes; Variance-Based Sensitivity Analysis;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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