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Testing Gibrat's legacy: A Bayesian approach to study the growth of firms

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  • Cefis, Elena
  • Ciccarelli, Matteo
  • Orsenigo, Luigi

Abstract

Gibrat's law is a referent model of corporate growth dynamics. This paper employs Bayesian panel data methods to test for Gibrat's law and its implications. Using a Pharmaceutical Industry Database (1987-1998), we find evidence against Gibrat's law on average, within or across industries. Estimated steady states differ across firms, and firm sizes and growth rates don't converge within the same industry to a common limiting distribution. There is only weak evidence of mean reversion: initial larger firms do not grow relatively slower than smaller firms. Differences in growth rates and in size steady state are persistent and firm-specific, rather than sizespecific.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 18 (2007)
Issue (Month): 3 (September)
Pages: 348-369

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Handle: RePEc:eee:streco:v:18:y:2007:i:3:p:348-369

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Web page: http://www.elsevier.com/locate/inca/525148

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Citations

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Cited by:
  1. Kessides, Ioannis N. & Tang, Li, 2011. "Sunk costs, market contestability, and the size distribution of firms," Policy Research Working Paper Series 5540, The World Bank.
  2. E. Cefis & O. Marsili & E.J.J. Schenk, 2006. "The effects of mergers and acquisitions on the firm size distribution," Working Papers 06-17, Utrecht School of Economics.
  3. Marco Capasso & Elena Cefis & Alessandro Sapio, 2013. "Reconciling quantile autoregressions of firm size and variance–size scaling," Small Business Economics, Springer, vol. 41(3), pages 609-632, October.
  4. Colombelli, Alessandra & Haned, Naciba & Le Bas, Christian, 2013. "On firm growth and innovation: Some new empirical perspectives using French CIS (1992–2004)," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 14-26.

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