Eur. Phys. J. B 57, 127-130 (2007)
https://doi.org/10.1140/epjb/e2007-00133-4

A generalized preferential attachment model for business firms growth rates

I. Empirical evidence

¹ Faculty of Economics, University of Florence, via delle Pandette 9, 50127 Florence, Italy
² IMT Institute for Advanced Studies, via S. Micheletto 3, 55100 Lucca, Italy
³ Center for Polymer Studies and Department of Physics, Boston University, Boston, MA, 02215, USA
⁴ Department of Physics, Yeshiva University, 500 West 185th Street,  New York, NY, 10033, USA
⁵ Tokyo University of Information Sciences, Chiba City, 265-8501, Japan

Corresponding authors: ^a pammolli@gmail.com - ^b dffu@buphy.bu.edu - ^c buldyrev@yu.edu - ^d riccaboni@unifi.it - ^e kaushik@buphy.bu.edu - ^f yamasaki@rsch.tuis.ac.jp - ^g hes@buphy.bu.edu

Received: 31 August 2006
Revised: 13 December 2006
Published online: 16 May 2007

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 ζ = 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.