A stochastic analysis of firm dynamics: Their impact on the firm size distribution

Alexandre Reginster

Physica A: Statistical Mechanics and its Applications, 2021, vol. 570, issue C

Abstract: The Pareto distribution is known for its wide range of applications, including the distribution of firm sizes. Exhaustive databases on firm sizes showed deviations from the Pareto firm size distribution for the smallest and largest firm sizes. Therefore, stochastic models of firm dynamics reproducing a Pareto firm size distribution could be further generalized in order to also reproduce these deviations. Based on Córdoba (2008), we build a model of firm dynamics which can generate a wide variety of steady-state distributions and we make clear the relationship between the growth dynamics of the firms and the resulting shape of the firm size distribution. To the light of our model, we analyse the links between the observed firm dynamics and the shape of firm size distribution in Belgium between 2006 and 2013.

Keywords: Firm size distribution; Firm dynamics; Steady-state; Pareto; Transition probabilities; Gibrat’s law (search for similar items in EconPapers)
JEL-codes: L11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:570:y:2021:i:c:s0378437121000893

DOI: 10.1016/j.physa.2021.125817

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