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From Gibrat'S Legacy To Gibrat'S Fallacy. A Bayesian Approach To Study The Growth Of Firms

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Author Info

  • Elena Cefis

    (Università di Bergamo)

  • Luigi Orsenigo

    (Università Bocconi)

  • Matteo Ciccarelli

    (Universidad de Alicante)

Abstract

We aim at testing Gibrat's Law, a building block of the corporate growth dynamics. Using a Bayesian statistical framework that nests previous approaches, we provide evidence against Gibrat's law on average, within or across industries. Notwithstanding, data show only weak evidence of mean reversion, i.e. initial larger firms do not grow relatively slower than smaller firms. Moreover, differences in growth rates and in size steady state are persistent and firm-specific. Previous results confirming Gibrat's argument are likely to be incorrect being based on models that do not exploit appropriately all information contained in a panel data set.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2002-19.pdf
File Function: Fisrt version / Primera version, 2002
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2002-19.

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Length: 52 pages
Date of creation: Oct 2002
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2002-19

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Keywords: Gibrat's Law; Panel Data; Heterogeneity; Bayesian Estimation;

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References

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  1. Goddard, John & Wilson, John & Blandon, Peter, 2002. "Panel tests of Gibrat's Law for Japanese manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 415-433, March.
  2. Cefis, Elena & Orsenigo, Luigi, 2001. "The persistence of innovative activities: A cross-countries and cross-sectors comparative analysis," Research Policy, Elsevier, vol. 30(7), pages 1139-1158, August.
  3. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2003. "Does Gibrat's Law hold among young, small firms?," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 213-235, August.
  4. Giulio Bottazzi & Giovanni Dosi & Marco Lippi & Fabio Pammolli & Massimo Riccaboni, 2000. "Processes of corporate growth in the evolution of an innovation-driven industry. The case of pharmaceuticals," LEM Papers Series 2000/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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  8. Harhoff, Dietmar & Stahl, Konrad O. & Woywode, Michael, 1996. "Legal Form, Growth and Exit of West German Firms - Empirical Results for Manufacturing, Construction, Trade and Service Industries," CEPR Discussion Papers 1401, C.E.P.R. Discussion Papers.
  9. Canova, Fabio & Marcet, Albert, 1995. "The Poor Stay Poor: Non-Convergence Across Countries and Regions," CEPR Discussion Papers 1265, C.E.P.R. Discussion Papers.
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  12. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
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Cited by:
  1. G. Bottazzi & E. Cefis & G. Dosi & A. Secchi, 2007. "Invariances and Diversities in the Patterns of Industrial Evolution: Some Evidence from Italian Manufacturing Industries," Small Business Economics, Springer, vol. 29(1), pages 137-159, June.

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