A multistate demographic model for firms in the province of Gelderland

5 Conclusions

In this paper we tried to investigate the separate effects of the age, period and cohort
dimensions in decomposing time effects in firm mortality. The standard APC model
was applied and was extended by introducing explanatory variables.

Decomposing time into three dimensions turned out to be a useful step. It removes the
bias in the estimates of age effects, and gives additional information about the period
and cohort structure in the mortality structure. Including a cohort variable in the
analysis of mortality of firms, turned out to be a useful approach. Even though the effect
of period on mortality is larger than the effect of cohorts, also cohorts explain a
significant share of the variation in mortality of firms. The demographic concept of
cohorts is therefore applicable to the population of firms as well.

The explanatory variables all worked as expected. Mortality rates inside the Economic
Main Structure are higher than outside the EMS. Also the more employees a firm has,
the lower the chances of mortality. Further, also economic activity matters. Lowest
mortality rates were found in the industry sector, the highest in the trade sector.

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