On the Robustness of the Fat-Tailed Distribution of Firm Growth Rates: A Global Sensitivity Analysis

24 Pages Posted: 15 Apr 2016

See all articles by Giovanni Dosi

Giovanni Dosi

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM)

Marcelo C. Pereira

University of Campinas

Maria Enrica Virgillito

Scuola Superiore Sant'Anna di Pisa

Date Written: March 30, 2016

Abstract

Firms grow and decline by relatively lumpy jumps which cannot be accounted by the cumulation of small, "atom-less", independent shocks. Rather "big" episodes of expansion and contraction are relatively frequent. More technically, this is revealed by fat tail distributions of growth rates. This applies across different levels of sectoral disaggregation, across countries, over different historical periods for which there are available data. What determines such property? In Dosi et al., (2015) we implemented a simple multi-firm evolutionary simulation model, built upon the coupling of a replicator dynamic and an idiosyncratic learning process, which turns out to be able to robustly reproduce such a stylized fact. Here, we investigate, by means of a Kriging meta-model, how robust such "ubiquitousness" feature is with regard to a global exploration of the parameters space. The exercise confirms the high level of generality of the results in a statistically robust global sensitivity analysis framework.

Keywords: Firm Growth Rates, Fat Tail Distributions, Kriging Meta-Modeling, Near-Orthogonal Latin Hypercubes, Variance-Based Sensitivity Analysis

JEL Classification: C15, C63, D21, D83, L25

Suggested Citation

Dosi, Giovanni and Pereira, Marcelo and Virgillito, Maria Enrica, On the Robustness of the Fat-Tailed Distribution of Firm Growth Rates: A Global Sensitivity Analysis (March 30, 2016). Available at SSRN: https://ssrn.com/abstract=2764355 or http://dx.doi.org/10.2139/ssrn.2764355

Giovanni Dosi (Contact Author)

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta, 33
Pisa, I-56127
Italy

HOME PAGE: www.lem.sssup.it

Marcelo Pereira

University of Campinas ( email )

Rua Pitagoras 353
Campinas, Campinas 13088-857
Brazil

Maria Enrica Virgillito

Scuola Superiore Sant'Anna di Pisa ( email )

Biblioteca Scuola Superiore Sant'Anna
Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

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