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 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 –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