Articles producció científica> Gestió d'Empreses

Thermodynamics of firms' growth

  • Identification data

    Identifier: PC:1266
    Authors:
    Plastino, AngeloHernando, RicardoHernando, AlbertoZambrano, EduardoFernández Bariviera, Aurelio
    Abstract:
    The distribution of firms’ growth and firms’ sizes is a topic under intense scrutiny. In this paper, we show that a thermodynamic model based on the maximum entropy principle, with dynamical prior information, can be constructed that adequately describes the dynamics and distribution of firms’ growth. Our theoretical framework is tested against a comprehensive database of Spanish firms, which covers, to a very large extent, Spain’s economic activity, with a total of 1 155 142 firms evolving along a full decade. We show that the empirical exponent of Pareto’s law, a rule often observed in the rank distribution of large-size firms, is explained by the capacity of economic system for creating/destroying firms, and that can be used to measure the health of a capitalist-based economy. Indeed, our model predicts that when the exponent is larger than 1, creation of firms is favoured; when it is smaller than 1, destruction of firms is favoured instead; and when it equals 1 (matching Zipf’s law), the system is in a full macroeconomic equilibrium, entailing ‘free’ creation and/or destruction of firms. For medium and smaller firmsizes, the dynamical regime changes, the whole distribution can no longer be fitted to a single simple analytical form and numerical prediction is required. Our model constitutes the basis for a full predictive framework regarding the economic evolution of an ensemble of firms. Such a structure can be potentially used to develop simulations and test hypothetical scenarios, such as economic crisis or the response to specific policy measures.
  • Others:

    Author, as appears in the article.: Plastino, Angelo Hernando, Ricardo Hernando, Alberto Zambrano, Eduardo Fernández Bariviera, Aurelio
    Department: Gestió d'Empreses
    URV's Author/s: Fernández Bariviera, Aurelio Zambrano, Eduardo Hernando, Alberto Hernando, Ricardo Plastino, Angelo
    Keywords: Statistical thermodynamics Zipf Law firms' growth
    Abstract: The distribution of firms’ growth and firms’ sizes is a topic under intense scrutiny. In this paper, we show that a thermodynamic model based on the maximum entropy principle, with dynamical prior information, can be constructed that adequately describes the dynamics and distribution of firms’ growth. Our theoretical framework is tested against a comprehensive database of Spanish firms, which covers, to a very large extent, Spain’s economic activity, with a total of 1 155 142 firms evolving along a full decade. We show that the empirical exponent of Pareto’s law, a rule often observed in the rank distribution of large-size firms, is explained by the capacity of economic system for creating/destroying firms, and that can be used to measure the health of a capitalist-based economy. Indeed, our model predicts that when the exponent is larger than 1, creation of firms is favoured; when it is smaller than 1, destruction of firms is favoured instead; and when it equals 1 (matching Zipf’s law), the system is in a full macroeconomic equilibrium, entailing ‘free’ creation and/or destruction of firms. For medium and smaller firmsizes, the dynamical regime changes, the whole distribution can no longer be fitted to a single simple analytical form and numerical prediction is required. Our model constitutes the basis for a full predictive framework regarding the economic evolution of an ensemble of firms. Such a structure can be potentially used to develop simulations and test hypothetical scenarios, such as economic crisis or the response to specific policy measures.
    Thematic Areas: Economics and business Economía y empresa Economia i empresa
    licence for use: https://creativecommons.org/licenses/by/3.0/es/
    ISSN: 1742-5689
    Author identifier: N/A N/A N/A N/A 0000-0003-1014-1010
    Record's date: 2016-02-16
    Journal volume: 12
    Papper version: info:eu-repo/semantics/publishedVersion
    Link to the original source: https://royalsocietypublishing.org/doi/full/10.1098/rsif.2015.0789
    Licence document URL: https://repositori.urv.cat/ca/proteccio-de-dades/
    Article's DOI: 10.1098/rsif.2015.0789
    Entity: Universitat Rovira i Virgili
    Journal publication year: 2015
    Publication Type: Article Artículo Article
  • Keywords:

    Termodinàmica
    Statistical thermodynamics
    Zipf Law
    firms' growth
    Economics and business
    Economía y empresa
    Economia i empresa
    1742-5689
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