A fast growing research on empirical evidence shows that the firms' birth-death process drives employment fluctuations. This paper argues for two dynamical causal links. The other one identifies investment activity as the main determinant of internal finance. Differently from the first one, aggregate elements affect this link via interest rate changes. Moreover, attention should also be paid to the cash flow-debt commitments ratio.
Firms sell a homogeneous good at a given stochastic price.
This stochasticity is the source of uncertainty in the model, which is the ultimate cause of bankruptcies. When a firm goes bankrupt, it leaves its site. Again, financial factors affect firms' geographical and equity distribution, the turnover rate and, at the end, aggregate dynamics. The paper is organized as follow. Section 3 presents the simulation's results, while the following section estimates the model by using UK longitudinal panel data between 1984-1999.