Bankruptcy as an exit mechanism for systems with a variable number of components

Domenico Delli Gatti, Corrado Di Guilmi, Edoardo Gaffeo and Mauro Gallegati

Physica A: Statistical Mechanics and its Applications, 2004, vol. 344, issue 1, 8-13

Abstract: Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the available evidence. We discuss a recently proposed macroeconomic model with random multiplicative shocks and a mechanism for exit based on bankruptcy, which displays several observed stylized facts for firms' dynamics, like power law distributions for firms' sizes and Laplace distributions for firms' growth rates.

Keywords: Power law; Bankruptcy; Econophysics (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:344:y:2004:i:1:p:8-13

DOI: 10.1016/j.physa.2004.06.079

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