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Gibrat's Law: Are the Services Different?

  • Roy Thurik
  • Enrico Santarelli
  • David Audretsch
  • Luuk Klomp

Several noted surveys on intra-industry dynamics have reached the conclusion from a large body of evidence that Gibrat's Law does not hold. However, almost all of these studies have been based on manufacturing. There are compelling reasons to doubt whether these findings hold for the services. In this paper we examine whether the basic tenet underlying Gibrat's Law - that growth rates are independent of firm size - can be rejected for the services as it has been for manufacturing. Based on a large sample of Dutch firms the evidence suggests that growth rates are, in fact, independent of firm size. Validation of Gibrat's Law in the services suggests that the dynamics of industrial organisation for services may not simply mirror that for manufacturing. This report includes a full survey of more than 50 empirical studies on firm growth rates.

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Paper provided by EIM Business and Policy Research in its series Scales Research Reports with number H200201.

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Length: 48 pages
Date of creation: 27 Aug 2002
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Handle: RePEc:eim:papers:h200201
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