A Descriptive Method of Firm Size Transition Dynamics Using Markov Chain

Boyang You and Kerry Papps

Papers from arXiv.org

Abstract: Social employment, which is mostly carried by firms of different types, determines the prosperity and stability of a country. As time passing, the fluctuations of firm employment can reflect the process of creating or destroying jobs. Therefore, it is instructive to investigate the firm employment (size) dynamics. Drawing on the firm-level panel data extracted from the Chinese Industrial Enterprises Database 1998-2013, this paper proposes a Markov-chain-based descriptive approach to clearly demonstrate the firm size transfer dynamics between different size categories. With this method, any firm size transition path in a short time period can be intuitively demonstrated. Furthermore, by utilizing the properties of Markov transfer matrices, the definition of transition trend and the transition entropy are introduced and estimated. As a result, the tendency of firm size transfer between small, medium and large can be exactly revealed, and the uncertainty of size change can be quantified. Generally from the evidence of this paper, it can be inferred that small and medium manufacturing firms in China have greater job creation potentials compared to large firms over this time period.

Date: 2022-08
New Economics Papers: this item is included in nep-bec, nep-cna, nep-hme and nep-sbm
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2208.13012 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2208.13012

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().