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A Generalized Gibrat'S Law

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  • Juan Carlos Córdoba

Abstract

Many economic and non-economic variables such as income, wealth, firm size, or city size often distribute Pareto in the upper tail. It is well established that Gibrat's law can explain this phenomenon, but Gibrat's law often does not hold. This note characterizes a class of processes, one that includes Gibrat's law as a special case, that can explain Pareto distributions. Of particular importance is a parsimonious generalization of Gibrat's law that allows size to affect the variance of the growth process but not its mean. This note also shows that under plausible conditions Zipf's law is equivalent to Gibrat's law. Copyright © (2008) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Juan Carlos Córdoba, 2008. "A Generalized Gibrat'S Law," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1463-1468, November.
  • Handle: RePEc:ier:iecrev:v:49:y:2008:i:4:p:1463-1468
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    Cited by:

    1. M. Modica & A. Reggiani & P. Nijkamp, 2015. "A Comparative Analysis of Gibrat’s and Zipf’s Law on Urban Population," Working Papers wp1008, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Distante, Roberta & Petrella, Ivan & Santoro, Emiliano, 2018. "Gibrat’s law and quantile regressions: An application to firm growth," Economics Letters, Elsevier, vol. 164(C), pages 5-9.
    3. Halvarsson, Daniel, 2013. "Industry Differences in the Firm Size Distribution," Ratio Working Papers 214, The Ratio Institute.
    4. Tomoya Mori & Tony E. Smith, 2009. "A Reconsideration of the NAS Rule from an Industrial Agglomeration Perspective," KIER Working Papers 669, Kyoto University, Institute of Economic Research.

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