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On the Irreconcilability of Pareto and Gibrat Laws

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Author Info
Giulio Bottazzi

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Abstract

If business firms face a multiplicative growth process in which their growth rates are independent from their sizes, then these sizes cannot be distributed according to a stationary Pareto distribution. At the same time , the Laplace distribution of growth rates cannot be easily reconciled with a Pareto distribution of firm sizes. Recent contributions, using formal arguments, seems to contrast these statements. We prove that the proposed formal results are wrong.

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Publisher Info
Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2007/10.

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Date of creation: 12 Mar 2007
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Handle: RePEc:ssa:lemwps:2007/10

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Related research
Keywords: Firm Growth Gibrat's Law Power law distribution Laplace distribution.

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References listed on IDEAS
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  1. Giulio Bottazzi & Angelo Secchi, 2005. "Explaining the Distribution of Firms Growth Rates," LEM Papers Series 2005/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
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  2. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April. [Downloadable!] (restricted)
  3. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March. [Downloadable!] (restricted)
  4. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August. [Downloadable!] (restricted)
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This page was last updated on 2008-7-22.

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