Bimodality in the firm size distributions: a kinetic exchange model approach

TL;DR

This paper introduces a modified kinetic exchange model demonstrating how nonlinear retention rates can produce bimodal distributions in firm sizes and wealth, aligning with observed phenomena in developing economies.

Contribution

It presents a novel kinetic exchange model with nonlinear retention rates that explains bimodality in firm size and wealth distributions.

Findings

Nonlinear retention rates cause bimodality in distributions.

Model reproduces features of wealth and firm size distributions.

Accommodates binary and system-wide trading scenarios.

Abstract

Firm growth process in the developing economies is known to produce divergence in their growth path giving rise to bimodality in the size distribution. Similar bimodality has been observed in wealth distribution as well. Here, we introduce a modified kinetic exchange model which can reproduce such features. In particular, we will show numerically that a nonlinear retention rate (or savings propensity) causes this bimodality. This model can accommodate binary trading as well as the whole system-side trading thus making it more suitable to explain the non-standard features of wealth distribution as well as firm size distribution.