Aggregate fluctuations and the distribution of firm growth rates

Giulio Bottazzi, Le Li and Angelo Secchi

Industrial and Corporate Change, 2019, vol. 28, issue 3, 635-656

Abstract: We propose an aggregate growth index that explicitly accounts for fat tails in the firm size distribution and for the negative scaling relation between the size of the firm and the volatility of its growth rates. Using Compustat data on US publicly traded company, we show that the new index tracks aggregate fluctuations much better than simpler measures of central tendency of the dynamics of firms, like the growth rates sample average, confirming that the statistical properties characterizing the micro-economic dynamics of firms are relevant for the dynamics of the aggregate. To better characterize the origins of aggregate fluctuations, we decompose the index in two parts, describing, respectively, the modal (typical) value of log growth rates and the tilt (asymmetry) of their distribution. Regression analysis shows that models based on this decomposition, despite their simplicity, possess a remarkable explanatory and predictive power with respect to the aggregate growth.

JEL-codes: C13 D22 E3 L25 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Aggregate fluctuations and the distribution of firm growth rates (2019)
Working Paper: Aggregate fluctuations and the distribution of firm growth rates (2019)
Working Paper: Aggregate fluctuations and the distribution of firm growth rates (2017)
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