Production, depreciation and the size distribution of firms

Qi Ma, Yongwang Chen, Hui Tong and Zengru Di

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 13, 3209-3217

Abstract: Many empirical researches indicate that firm size distributions in different industries or countries exhibit some similar characters. Among them the fact that many firm size distributions obey power-law especially for the upper end has been mostly discussed. Here we present an agent-based model to describe the evolution of manufacturing firms. Some basic economic behaviors are taken into account, which are production with decreasing marginal returns, preferential allocation of investments, and stochastic depreciation. The model gives a steady size distribution of firms which obey power-law. The effect of parameters on the power exponent is analyzed. The theoretical results are given based on both the Fokker–Planck equation and the Kesten process. They are well consistent with the numerical results.

Keywords: Size distribution of firms; Power-law; Production and depreciation; Econophysics (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:13:p:3209-3217

DOI: 10.1016/j.physa.2008.01.064

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