Simfirms

Leo van Wissen

University Groningen

&

Corina Huisman

Netherlands Interdisciplinary Demographic Institute NIDI The

Hague

Theme 1

introduction and general

synthetic businesses

A short history..

• early nineties: request from Ministery of Spatial Planning: develop a demographic model of economic dynamics

• answer: the microsimulation model SIMFIRMS

• developed in the period 1991-1996• second generation SIMFIMS-2 is being

developed now

characteristics

• micro-simulation of firm growth, migration, death• macro simulation of new firm formation• basic unit: business establishment (be’s)• output: # of be’s, employment• Output dimensions:

– economic activity (16 classes: 1-2 digit codes)

– spatial units: municipalities (approx. 500 spatial units)

• database: LISA database– a longitudinal database of be’s covering the

years 1986, 1990, 1991, originally developed for social security administration

– n=600 thousand (1990)– one province missing (including Amsterdam

region)

model applications:

• remained in the developmental stage• not applied operationally• provided many insights into the spatial dynamics

of firms and how to model them, e.g.– spatial dimensions of new firm formation

– role of policy variables, i.e. new commercial land, office space

– demand / supply relationship and the ecological notion of carrying capacity

SIMFIRMS 2:

• more state of the art theoretical and empirical insights into the specification

• better quality data for parameter estimation and validation

• better/faster hard- and software

• more userfriendly

Input for SIMFIRMS 2:

• business register of the province of Gelderland 1986-2002– much higher data quality– much longer time series– but still not without problems, such as:

• small firms / self employed are not completely covered, but coverage increases over time

• size of firms not always up to date

Theme 2

Firmography

some notes on the various components:

• births: – spin-offs (firm based birth probabilities) and– startups (labour market based entrepreneurship

startup rates)

• growth of existing firms: based on modern specifications of Gibrat’s law that include various regressors

• death: multi-decrement life tables

• migration: discrete choice framework, 2-step approach: – outmigration– destination choice

additional features

• demand – supply interactions, using the concept of carrying capacity

• macro constraints on micro outcomes (e.g. consistency with regional economic growth scenarios)

• economic infrastructure scenarios: what if a new commercial or industrial site, or new office space is being developed?

Theme 3

Location and

interaction between firms

Interactions between firms

• concept of carrying capacity: maximum size of the population that can exist within a given environment

• for firms: maximum level of demand within a given environment

mechanism (in each location i):

• Demand > current supply (=present level of firms) potential for growth:– higher birth rates– higher growth rates– lower outmigration rates– higher immigration probabilities– lower death rates

mechanism (in each location i):

• Demand < current supply (=present level of firms) potential for decline:– lower birth rates– lower (or negative) growth rates– higher outmigration rates– lower immigration probabilities– higher death rates

• demand: exerted by consumers and other firms in the neighborhood

• consumer firm interactions• interindustry interactions• interactions are a function of:

– interindustry deliveries: technical coefficients of IO matrix

– distance

Theme 4

future work

&

scenarios

Future work

• SIMFIRMS 2:– specification– estimation of parameters– validation– scenarios

• impact of new economic infrastructure: commercial & industrial sites, office space

• specified at the regional / local level