A Generalized Preferential Attachment Model for Business Firms Growth Rates - I. Empirical Evidence

European Physical Journal B, Vol. 57, No. 2, pp. 127-130, May 2007

Posted: 26 Nov 2007 Last revised: 24 Dec 2007

See all articles by Dongfeng Fu

Dongfeng Fu

Boston University - Department of Physics

Fabio Pammolli

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering; CERM Foundation

Sergey Buldyrev

Yeshiva University - Department of Physics

H. Eugene Stanley

Boston University - Center for Polymer Studies

Kaushik Matia

Boston University - Department of Physics

Kazuko Yamasaki

Tokyo University of Information Sciences

Abstract

We introduce a model of proportional growth to explain the distribution P(g) of business firm growth rates. The model predicts that P(g) is Laplace in the central part and depicts an asymptotic power - law behavior in the tails with an exponent z = 3. Because of data limitations, previous studies in this field have been focusing exclusively on the Laplace shape of the body of the distribution. We test the model at different levels of aggregation in the economy, from products, to firms, to countries, and we find that the predictions are in good agreement with empirical evidence on both growth distributions and size-variance relationships.

Suggested Citation

Fu, Dongfeng and Pammolli, Fabio and Buldyrev, Sergey and Stanley, H. Eugene and Matia, Kaushik and Yamasaki, Kazuko, A Generalized Preferential Attachment Model for Business Firms Growth Rates - I. Empirical Evidence. European Physical Journal B, Vol. 57, No. 2, pp. 127-130, May 2007. Available at SSRN: https://ssrn.com/abstract=1031882

Dongfeng Fu

Boston University - Department of Physics ( email )

590 Commonwealth Avenue
Boston, MA 02215
United States

Fabio Pammolli (Contact Author)

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering ( email )

Via Lambruschini 4C - building 26/A
Milano, 20156
Italy

CERM Foundation ( email )

Via Fiorentina, 1
Siena, Siena 53100
Italy

HOME PAGE: http://www.cermlab.it

Sergey Buldyrev

Yeshiva University - Department of Physics ( email )

500 West, 185th Street
New York, NY 10033
United States

H. Eugene Stanley

Boston University - Center for Polymer Studies ( email )

Boston, MA 02215
United States

Kaushik Matia

Boston University - Department of Physics ( email )

590 Commonwealth Avenue
Boston, MA 02215
United States

Kazuko Yamasaki

Tokyo University of Information Sciences ( email )

Tokyo
Japan

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