A look at the relationship between industrial dynamics and aggregate fluctuations

New Economic Windows 01/2008; 7(0803). DOI: 10.1007/978-88-470-1083-3_3
Source: RePEc


The firmly established evidence of right-skewness of the firms’ size distribution is generally modelled recurring to some variant of the Gibrat’s Law of Proportional Effects. In spite of its empirical success, this approach has been harshly criticized on a theoretical ground due to its lack of economic contents and its unpleasant long-run implications. In this chapter we show that a right-skewed firms’ size distribution, with its upper tail scaling down as a power law, arises naturally from a simple choice-theoretic model based on financial market imperfections and a wage setting relationship. Our results rest on a multi-agent generalization of the prey-predator model, firstly introduced into economics by Richard Goodwin forty years ago.

Download full-text


Available from: Edoardo Gaffeo, Oct 09, 2015
19 Reads
  • [Show abstract] [Hide abstract]
    ABSTRACT: The relationships between Zipf’s law (a relevant model for the firms’ size and the financial investment amounts) and the major concentration indices are derived. The Hirschman–Herfindahl index is the most sensitive index in contexts where Zipf’s law applies. The full paper can be downloaded at
    Economics Letters 07/2013; DOI:10.1016/S0165-1765(02)00251-3 · 0.45 Impact Factor
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: The market for unseasoned equity has the unusual and distinguishing feature of periods of concentrated activity in terms of both volume and underpricing. This paper formally documents the existence of such periods using a regime-switching model that dates transitions between hot and cold states. A number of hot periods are identified over a 20-year period using a variety of IPO activity measures that capture different aspects of new issue volume, proceeds and underpricing. The study further documents a leading relationship between underpricing and IPO volume of up to six months. This relationship supports the contention that the decision to issue is a function of current underpricing. Various reasons are hypothesised for this result and the paper finds supportive evidence through a VAR analysis that reveals the influence of stock market and business conditions. The results have implications for the information contained in current market conditions and the role of issuers, underwriters and investors (JEL G12, G14, G32).
    Multinational Finance Journal 06/2000; 4(1/2). DOI:10.17578/4-1/2-3 · 0.63 Impact Factor
Show more