A micro-simulation model of firms: Applications of concepts of the demography of the firm

Abstract

Recently, there is an increasing demand in spatial planning for mod-els based on the demographic concepts of birth and death of firms. This articledescribes the structure of a spatial demographic simulation model of firms, andits application within The Netherlands. The model structure is essentially of thefamiliar demographic cohort component type, where an initial cohort of firmsages in a number of discrete steps, and where in each step additions and subtrac-tions to and from the population are modelled using birth, death and migrationcomponents. Apart from the central processes of birth, death and migration, thetype of economic activity and firm size are highly important for understandingfirm behaviour over time. The article describes the transition functions for eachof the demographic components and for firm growth. In addition, some empiricalresults are presented of a number of model simulations in The Netherlands. Theresults were partly validated using observed economic demographic data. It isconcluded that a substantial amount of work remains to be done in this new field.The model presented here has direct implications for the research agenda of thestudy of the demography of the firm.