Bankruptcy as an exit mechanism for systems with a variable number of components

Di Guilmi, Corrado; Gaffeo, Edoardo; Gallegati, Mauro

Bankruptcy as an exit mechanism for systems with a variable number of components

Authors

Di Guilmi, Corrado

Gaffeo, Edoardo

Gallegati, Mauro

Description

Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the available evidence. We discuss a recently proposed macroeconomic model with random multiplicative shocks and a mechanism for exit based on bankruptcy, which displays several observed stylized facts for firms' dynamics, like power law distributions for firms' sizes and Laplace distribution for firms' growth rates.
APFA4 proceeding, 5 pages