On The Relationship Between Firms' Size And Growth Rate
Source: Scuola Superiore Sant'Anna
Since the seminal work of Pareto, many empirical analyses suggested that the distribution of firms size is characterized by an asymptotic power like behavior. At the same time, several investigations show that the distribution of annual growth rates of firms displays a remarkable double-exponential shape. Recently it has been suggested that both these statistical properties can be explained by assuming a bivariate Marshall-Olkin power-like distribution for the size of firms in subsequent time steps. Through analytical investigation, the author shows that the marginal distribution of growth rates implied by this assumption does not possess, in general, a Laplace shape and becomes degenerate when subsequent size levels are perfectly correlated.