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

Recently, there is an increasing demand in spatial planning for models base d on the demographic concepts of birth and death of firms. This article des cribes the structure of a spatial demographic simulation model of firms, an d its application within The Netherlands. The model structure is essentiall y of the familiar demographic cohort component type, where an initial cohor t of firms ages in a number of discrete steps, and where in each step addit ions and subtractions to and from the population are modelled using birth, death and migration components. Apart from the central processes of birth, death and migration, the type of economic activity and firm size are highly important for understanding firm behaviour over time. The article describe s the transition functions for each of the demographic components and fur f irm growth. In addition, some empirical results are presented of a number o f model simulations in The Netherlands. The results were partly validated u sing observed economic demographic data. It is concluded that a substantial amount of work remains to be done in this new field, The model presented h ere has direct implications for the research agenda of the study of the dem ography of the firm. JEL classification: R11, R15, R30.