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When is Gibrat's Law a Law?

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  • Daunfeldt, Sven-Olov

    () (The Ratio Institute (RATIO))

  • Elert, Niklas

    (The Ratio Institute (RATIO))

Abstract

The purpose of this paper is to investigate if the industry context matters for whether Gibrat's law is rejected or not using a dataset that consists of all limited firms in 5-digit NACE-industries in Sweden during 1998-2004. The results reject Gibrat's law on an aggregate level, since small firms grow faster than large firms. However, Gibrat's law is confirmed about as often as it is rejected when industry-specific regressions are estimated. It is also found that the industry context - e.g., minimum e¢ cient scale, market concentration rate, and number of young firms in the industry - matters for whether Gibrat's law is rejected or not.

Suggested Citation

  • Daunfeldt, Sven-Olov & Elert, Niklas, 2010. "When is Gibrat's Law a Law?," HUI Working Papers 45, HUI Research.
  • Handle: RePEc:hhs:huiwps:0045
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    Cited by:

    1. Arouri, Hassan & Ben Youssef, Adel & Quatraro, Francesco & Vivarelli, Marco, 2018. "Growth Dynamics of Young Small Firms: Evidence from Tunisia," GLO Discussion Paper Series 197, Global Labor Organization (GLO).
    2. Krafft Jackie & Quatraro Francesco & Colombelli Alessandra, 2011. "High Growth Firms and Technological Knowledge: Do gazelles follow exploration or exploitation strategies?," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201114, University of Turin.
    3. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," World Bank Research Observer, World Bank Group, vol. 30(2), pages 277-305.
    4. Arouri, Hassan & Ben Youssef, Adel & Quatraro, Francesco & Vivarelli, Marco, 2018. "Drivers of growth in Tunisia: Young firms vs incumbents," MERIT Working Papers 019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Tang, Ali, 2014. "Does Gibrat’s Law Hold for Swedish Energy Firms?," HUI Working Papers 99, HUI Research.
    6. Efendic, Nedim & Andersson, Fredrik W. & Wennberg, Karl, 2015. "Growth in first- and second-generation immigrant firms in Sweden," Ratio Working Papers 265, The Ratio Institute.
    7. Olubunmi Ipinnaiye & Declan Dineen & Helena Lenihan, 2017. "Drivers of SME performance: a holistic and multivariate approach," Small Business Economics, Springer, vol. 48(4), pages 883-911, April.
    8. Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2014. "Age and firm growth: evidence from three European countries," Small Business Economics, Springer, vol. 43(4), pages 823-837, December.
    9. Aili Tang, 2015. "Does Gibrat’s law hold for Swedish energy firms?," Empirical Economics, Springer, vol. 49(2), pages 659-674, September.
    10. repec:eso:journl:v:47:y:2016:i:2:p:213-245 is not listed on IDEAS
    11. Alex Coad & Christina Guenther, 2014. "Processes of firm growth and diversification: theory and evidence," Small Business Economics, Springer, vol. 43(4), pages 857-871, December.
    12. repec:spr:jeicoo:v:12:y:2017:i:1:d:10.1007_s11403-015-0152-x is not listed on IDEAS
    13. Dirk Burghardt & Marco Helm, 2015. "Firm growth in the course of mergers and acquisitions," Small Business Economics, Springer, vol. 44(4), pages 889-904, April.
    14. Maricica Moscalu, 2015. "Integration between the Romanian and the Euro Area Financial Markets and its Impact on the Growth Rate of Romanian Listed Companies," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(4), pages 138-149, August.
    15. Marko Peric & Vanja Vitezic, 2016. "Impact of global economic crisis on firm growth," Small Business Economics, Springer, vol. 46(1), pages 1-12, January.
    16. repec:kap:sbusec:v:49:y:2017:i:2:d:10.1007_s11187-017-9847-9 is not listed on IDEAS
    17. Arouri, Hassan & Youssef, Adel Ben & Quatraro, Francesco & Vivarelli, Marco, 2018. "The Determinants of Young Firms Growth in Tunisia," IZA Discussion Papers 11400, Institute for the Study of Labor (IZA).
    18. Halvarsson, Daniel, 2013. "Industry Differences in the Firm Size Distribution," Ratio Working Papers 214, The Ratio Institute.
    19. Marko Peric & Vanja Vitezic, 2016. "Impact of global economic crisis on firm growth," Small Business Economics, Springer, vol. 46(1), pages 1-12, January.

    More about this item

    Keywords

    Firm growth; firm size; job creation; small firms;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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