Skip to main content
SpringerLink
Log in

The patterns of output growth of firms and countries: Scale invariances and scale specificities

  • Original Paper
  • Published:
Empirical Economics Aims and scope Submit manuscript

Abstract

This work brings together two distinct pieces of evidence concerning, at the macro level, international distributions of incomes and their dynamics, and, at the micro level, the size distributions of firms and the properties of their growth rates. Our contribution to the literature is twofold. First, our empirical analysis provides a new look at the international distributions of incomes and growth rates by investigating more closely the relationship between the two entities and the statistical properties of the growth process. Second, we identify the statistical properties that are invariant with respect to the scale of observation (country or firm) as distinct from those that are scale specific. This exercise proposes a few major interpretative challenges regarding the correlating processes underlying the statistical evidence.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Amaral LAN, Gopikrishnan P, Plerou V, Stanley HE (2001) A model for the growth dynamics of economic organizations. Physica A 299: 127–136

    Article  Google Scholar 

  • Bairoch P (1981) The main trends in national economic disparities since the industrial revolution. In: Bairoch P, Levy-Leboyer M (eds) Disparities in economic development since the industrial revolution. Macmillan, Oxford

    Google Scholar 

  • Bak P, Chen K, Scheinkman J, Woodford M (1993) Aggregate fluctuations from independent sectoral shocks: self-organized criticality in a model of production and inventory dynamics. Ricerche Econ 47: 3–30

    Article  Google Scholar 

  • Bartelsman EJ, Doms M (2000) Understanding productivity: lessons from longitudinal microdata. J Econ Lit 38: 569–594

    Google Scholar 

  • Bianchi M (1997) Testing for convergence: evidence from nonparametric multimodality tests. J Appl Econ 12: 393–409

    Article  Google Scholar 

  • Bottazzi G (2004) Subbotools user’s manual. http://cafim.sssup.it/~giulio/software/subbotools/doc/subbotools.pdf

  • Bottazzi G, Secchi A (2003a) Why are distributions of firm growth rates tent-shaped. Econ Lett 80: 415–420

    Article  Google Scholar 

  • Bottazzi G, Secchi A (2003b) Common properties and sectoral specificities in the dynamics of US manufacturing companies. Rev Ind Organ 23: 217–232

    Article  Google Scholar 

  • Bottazzi G, Secchi A (2006a) Explaining the distribution of firms growth rates. Rand J Econ 37: 234–263

    Article  Google Scholar 

  • Bottazzi G, Secchi A (2006b) Gibrat’s law and diversification. Ind Corp Change 15: 847–875

    Article  Google Scholar 

  • Bottazzi G, Dosi G, Lippi M, Pammolli F, Riccaboni M (2001) Innovation and corporate growth in the evolution of the drug industry. Int J Ind Organ 19: 1161–1187

    Article  Google Scholar 

  • Bottazzi G, Coad A, Jacoby N, Secchi A (2005) Corporate growth and industrial dynamics: evidence from French manufacturing, LEM Working Paper, Sant’ Anna School, Pisa

  • Bottazzi G, Cefis E, Dosi G, Secchi A (2007) Invariances and diversities in the evolution of manufacturing industries. Small Bus Econ 29: 137–159

    Article  Google Scholar 

  • Brock WA (1999) Scaling in economics: a Reader’s guide. Ind Corp Change 8: 409–446

    Article  Google Scholar 

  • Canning D, Amaral LAN, Lee Y, Meyer M, Stanley HE (1998) Scaling the volatility of GDP growth rates. Econ Lett 60: 335–341

    Article  Google Scholar 

  • Castaldi C, Dosi G (2004) Income levels and income growth: Some new cross-country evidence and some interpretative puzzles. LEM Working Paper 2004-18, Sant’Anna School of Advanced Studies, Pisa

  • Castaldi C, Sapio S (2008) Growing like Mushrooms? Sectoral evidence from four large european economies. J Evol Econ 18: 509–527

    Article  Google Scholar 

  • Delli Gatti D, Di Guilmi C, Gaffeo E, Giulioni G, Gallegati M, Palestrini A (2005) A new approach to business fluctuations: heterogenous interacting agents, scaling laws and financial fragility. J Econ Behav Organ 56: 489–512

    Article  Google Scholar 

  • Dosi G (2007) Statistical regularities in the evolution of industries. a guide through some evidence and challenges for the theory. In: Brusoni S, Malerba F (eds) Perspectives on innovation. Cambrige University Press, Cambrige

    Google Scholar 

  • Dosi G, Freeman C, Fabiani S (1994) The process of economic development: introducing some stylized facts and theories on technologies, firms and institutions. Ind Corp Change 3: 1–45

    Article  Google Scholar 

  • Dosi G, Marsili O, Orsenigo L, Salvatore R (1995) Learning, market selection and the evolution of industrial structures. Small Bus Econ 7: 1–26

    Article  Google Scholar 

  • Dosi G, Fagiolo G, Roventini A (2006) An evolutionary model of endogenous business cycles. Comput Econ 27: 3–34

    Article  Google Scholar 

  • Durlauf SN (1994) Path dependence in aggregate output. Ind Corp Change 3: 148–171

    Article  Google Scholar 

  • Durlauf SN, Quah D (1999) The new empirics of economic growth. In: Taylor JB, Woodford M (eds) Handbook of macroeconomics, vol 1A. Elsevier, North-Holland

    Google Scholar 

  • Durlauf SN, Kourtellos A, Minkin A (2001) The local solow growth model. Eur Econ Rev 45: 928–940

    Article  Google Scholar 

  • Evans DS (1987) The relationship between firm size, growth and age: estimates for 100 manufacturing industries. J Ind Econ 35: 567–581

    Article  Google Scholar 

  • Fagiolo G, Napoletano M, Roventini A (2008) Are output growth-rate distributions fat-tailed? Some evidence from OECD countries. J Appl Econ (forthcoming)

  • Fiaschi D, Lavezzi AM (2005) On the determinants of growth volatility: a nonparametric approach, Working paper, University of Pisa

  • Gabaix X (2007) The Granular Origins of Aggregate Fluctuations, Working Paper. MIT Press, Cambridge

    Google Scholar 

  • Gibrat R (1931) Les inégalités economiques. Librairie du Recueil Sirey, Paris

    Google Scholar 

  • Hall BH (1987) The relationship between firm size and firm growth in the US manufacturing sector. J Ind Econ 35: 583–606

    Article  Google Scholar 

  • Hall P, York M (2001) On the calibration of Silverman’s test for multimodality. Stat Sin 11: 515–536

    Google Scholar 

  • Harberger AC (1998) A vision of the growth process. Am Econ Rev 88: 1–32

    Google Scholar 

  • Hart PE, Prais SJ (1956) The analysis of business concentration. J R Stat Soc 119: 150–191

    Article  Google Scholar 

  • Henderson DJ, Parmeter CF, Russell RR (2007) Convergence clubs: evidence from calibrated modality tests. working paper, University of California, Riverside

  • Heston A, Summers R, Aten B (2002) Penn World Table Version 6.1, Center for International Comparisons at the University of Pennsylvania (CICUP), October 2002

  • Hymer S, Pashigian P (1962) Firm size and rate of growth. J Polit Econ 70: 556–569

    Article  Google Scholar 

  • Ijiri Y, Simon HA (1977) Skew distributions and the size of business firms. North-Holland, Amsterdam

    Google Scholar 

  • Jones CI (1997) On the evolution of the world income distribution. J Econo Perspect 11: 19–36

    Google Scholar 

  • Jones CI (1999) Growth: with or without scale effects. Am Econ Rev Pap Proc 89: 139–144

    Google Scholar 

  • Lee Y, Amaral LAN, Canning D, Meyer M, Stanley HE (1998) Universal features in the growth dynamics of complex organizations. Phys Rev Lett 81: 3275–3278

    Article  Google Scholar 

  • Lindsay BG (1995) Mixture models: theory, geometry and applications. Institute for Mathematical Statistics, Hayward

    Google Scholar 

  • Maasoumi E, Racine J, Stengos T (2007) Growth and convergence: a profile of distribution dynamics and mobility. J Econom 136: 483–508

    Article  Google Scholar 

  • Maddison A (2001) The world economy: a millennial perspective. OECD, Paris

    Google Scholar 

  • Marsili O (2001) The anatomy and evolution of industries. Edward Elgar, Cheltenham

    Google Scholar 

  • Nelson RR (1981) Research on productivity growth and productivity differences: dead ends and new departures. J Econ Lit 19: 1029–1064

    Google Scholar 

  • Nelson RR, Winter SG (1982) An evolutionary theory of economic change. Harvard University Press, Cambridge

    Google Scholar 

  • Paap R, van Dijk HK (1998) Distribution and mobility of wealth of nations. Eur Econ Rev 42: 1269–1293

    Article  Google Scholar 

  • Pritchett L (2000) Understanding patterns of economic growth: searching for hills among plateaus, mountains and plains. World Bank Econ Rev 105: 221–250

    Google Scholar 

  • Quah D (1996) Twin peaks: growth and convergence in models of distribution dynamics. Econ J 106: 1045–1055

    Article  Google Scholar 

  • Quah D (1997) Empirics for growth and distribution: stratification, polarization and convergence clubs. J Econ Growth 2: 27–59

    Article  Google Scholar 

  • Silverman BW (1981) Using Kernel density estimates to investigate multi-modality. J R Stat Soc B 43: 97–99

    Google Scholar 

  • Silverman BW (1986) Density estimation for statistics and data analysis. Chapman & Hall, London

    Google Scholar 

  • Silverberg G, Verspagen B (2005) Evolutionary theorizing on economic growth. In: Dopfer K (eds) The evolutionary principles of economics. Cambridge University Press, Cambridge

    Google Scholar 

  • Simon HA, Bonini CP (1958) The size distribution of business firms. Am Econ Rev 48: 607–617

    Google Scholar 

  • Stanley MHR, Amaral LAN, Buldyrev SV, Havlin S, Leschhorn H, Maass P, Salinger MA, Stanley HE (1996) Scaling behavior in the growth of companies. Nature 379: 804–806

    Article  Google Scholar 

  • Steindl J (1965) Random processes and the growth of firms. Griffin, London

    Google Scholar 

  • Subbotin M (1923) On the law of frequency of errors. Mat Sb 31: 296–301

    Google Scholar 

  • Sutton J (1997) Gibrat’s legacy. J Econ Lit 35: 40–59

    Google Scholar 

  • Temple J (1999) The new growth evidence. J Econ Lit 37: 112–156

    Google Scholar 

  • White HA (1980) A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48: 817–838

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Innovation Studies, Copernicus Institute for Sustainable Development and Innovation, Utrecht University, PO Box 80115, 3508TC, Utrecht, The Netherlands

    Carolina Castaldi

  2. LEM, Sant’Anna School of Advanced Studies, Piazza Martiri delle Libertà 33, 56127, Pisa, Italy

    Giovanni Dosi

  3. University of Manchester, Manchester, UK

    Giovanni Dosi

Authors
  1. Carolina Castaldi
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Giovanni Dosi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Giovanni Dosi.

Additional information

The authors wish to thank Giulio Bottazzi, Buz Brock, Alessandro Nuvolari, Bart Los, Angelo Secchi, Gerry Silverberg, Eddy Szirmai and Bart Verspagen for helpful discussions. An anonymous referee and an editor helped to substantially improve the paper. We gratefully acknowledge support from the Robert Solow Post-doctoral Fellowship of Cournot Center for Economic Studies (to C. Castaldi) and from the Italian Ministry for University and Research MIUR, prot. nr. 2002132413.001 (to G. Dosi).

Rights and permissions

Reprints and permissions

About this article

Cite this article

Castaldi, C., Dosi, G. The patterns of output growth of firms and countries: Scale invariances and scale specificities. Empir Econ 37, 475–495 (2009). https://doi.org/10.1007/s00181-008-0242-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00181-008-0242-x

Keywords

JEL Classification

Search

Navigation