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Does Gibrat’s Law Hold in the Insurance Industry of China? A Test with Sequential Panel Selection Method


  • Guochen Pan

    () (Department of Insurance and Actuarial Science, Wuhan University, China)

  • Sen-Sung Chen

    () (Department of Risk Management and Insurance, Feng Chia University, Taiwan)

  • Tsangyao Chang

    () (Department of Finance, Feng Chia University, Taiwan)


This study applies the Sequential Panel Selection Method to investigate whether the growth rate of total insurance premium is independent of their size, as postulated by Robert Gibrat’s (1931) Law of Proportionate Effects. Time-series data for the total insurance premium of 35 insurance companies in China during the December 2005 to May 2011 period are used. Since other panel-based unit root tests are joint tests of a unit root for all members of a panel and are incapable of determining the mix of I(0) and I(1) series in a panel setting, the SPSM, proposed by Georgios Chortareas and George Kapetanios(2009), classifies a whole panel into a group of stationary series and a group of non-stationary series. In doing so, we can clearly identify how many and which series in the panel are stationary processes. The empirical results from the SPSM tests unequivocally indicate that Gibrat’s Law is only valid for one of these 35 companies studied here. Our study has important policy implications for insurance regulation, insurance market construction, and policyholder protection.

Suggested Citation

  • Guochen Pan & Sen-Sung Chen & Tsangyao Chang, 2012. "Does Gibrat’s Law Hold in the Insurance Industry of China? A Test with Sequential Panel Selection Method," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(3), pages 311-324, June.
  • Handle: RePEc:voj:journl:v:59:y:2012:i:3:p:311-324

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    References listed on IDEAS

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    Cited by:

    1. Hao Fang & Yen-Hsien Lee, 2013. "Are the Global REIT Markets Efficient by a New Approach?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 743-757, December.

    More about this item


    Gibrat’s law; Sequential panel selection method; Insurance; China;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models


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