A Cross-Sectional Analysis of Growth and Profit Rate Distribution: The Spanish Case

David Vidal-Tomás, Alba Ruiz-Buforn, Omar Blanco-Arroyo and Simone Alfarano
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Omar Blanco-Arroyo: Department of Economics, Universitat Jaume I, Campus del Riu Sec, 12071 Castellon, Spain

Mathematics, 2022, vol. 10, issue 6, 1-20

Abstract: We analyse the time evolution of the empirical cross-sectional distribution of firms’ profit and growth rates. In particular, we analyse the conditional properties of the empirical distributions depending on the size of the firms and the business cycle phase. In order to do so, we employ the Laplace distribution as a benchmark, further considering the Subbotin and Asymmetric Exponential Power (AEP hereafter) distributions, to capture the potential asymmetry and leptokurtosis of the empirical distribution. Our results show that the profit rates of large firms are characterised by an asymmetric Laplace distribution with parameters largely independent of the business cycle phase. Small firms, instead, are characterised by the AEP distribution, which accounts for the conditional dependence of distribution on the phase of the business cycle. We observe that the largest firms are more robust to downturns compared to the small firms, given their invariant distributional characteristics during crisis periods.

Keywords: profit rates; growth rates; firm size; business cycle; Laplace distribution; asymmetric exponential power distribution (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
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Working Paper: A cross-sectional analysis of growth and profit rate distribution: the Spanish case (2020)
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