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

Matthias Duschl

No 2014-01, Working Papers on Innovation and Space from Philipps University Marburg, Department of Geography

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.

Keywords: regional resilience; firm growth; growth rates distributions; fat tails; asymmetric exponential power; evolutionary perspective (search for similar items in EconPapers)
JEL-codes: C46 L16 R11 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-01-29
New Economics Papers: this item is included in nep-geo, nep-sbm and nep-ure
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Citations: View citations in EconPapers (7)

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