A paradigm shift from production function to production copula: statistical description of production activity of firms

DOI10.1080/14697688.2010.548823MaRDI QIDQ2873564zbMATH OpenOpenAlexFDO

Authors Hiroshi Iyetomi, Yoshi Fujiwara, Yuichi Ikeda, Wataru Souma, Hideaki Aoyama

Publication date 24 January 2014

Published in Quantitative Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0902.1576

zbMATH Keywords

copulascorporate financecorrelationeconophysicsheterogeneity of agentsstatistical methods

Mathematics Subject Classification ID

Characterization and structure theory for multivariate probability distributions; copulas (62H05) Applications of statistics to actuarial sciences and financial mathematics (62P05) Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Statistical methods; risk measures (91G70)

Abstract: Heterogeneity of economic agents is emphasized in a new trend of macroeconomics. Accordingly the new emerging discipline requires one to replace the production function, one of key ideas in the conventional economics, by an alternative which can take an explicit account of distribution of firms' production activities. In this paper we propose a new idea referred to as production copula; a copula is an analytic means for modeling dependence among variables. Such a production copula predicts value added yielded by firms with given capital and labor in a probabilistic way. It is thereby in sharp contrast to the production function where the output of firms is completely deterministic. We demonstrate empirical construction of a production copula using financial data of listed firms in Japan. Analysis of the data shows that there are significant correlations among their capital, labor and value added and confirms that the values added are too widely scattered to be represented by a production function. We employ four models for the production copula, that is, trivariate versions of Frank, Gumbel and survival Clayton and non-exchangeable trivariate Gumbel; the last one works best.

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Cites work

• A new look at the statistical model identification
• Some Generalized Functions for the Size Distribution of Income
• Statistical Size Distributions in Economics and Actuarial Sciences

Cited in

(2)

• Firm growth function and extended-Gibrat's property
• Modeling vine-production function: an approach based on vine copula

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• QRM

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