Does Classical Competition Explain the Statistical Features of Firm Growth?

Simone Alfarano and Mishael Milaković

No 2008-03, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: We express the idea of classical competition in a statistical equilibrium model, where the tendency for competition to equalize profit rates results in an exponential power (or Subbotin) distribution. The model supports and extends recent evidence on the Laplace distribution of growth rates in firm size. We also find tent-shaped distributions in the size growth rates of Forbes Global 2000 companies, which we interpret as preliminary evidence in favor of the hypothesis that classical competition is a globally operating mechanism.

Keywords: Statistical equilibrium; classical competition; maximum entropy; profit rates; firm growth rates; Subbotin distribution; Laplace distribution (search for similar items in EconPapers)
JEL-codes: C16 D21 E10 F01 L10 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (27)

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Journal Article: Does classical competition explain the statistical features of firm growth? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:7022

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