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Gibrat’s Law with Mild Nonrandom Growth

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  • James Giordano

Abstract

Gibrat’s Law (GL) has repeatedly failed to gain full empirical confirmation in specific industries. This study offers a deliberately favorable opportunity for full confirmation in the truckload sector of the U.S. trucking industry where firms are highly homogeneous. As such, most nonrandom determinants of growth remain very similar for all firms, so significant differences in growth rates are not expected. Still, there is only incomplete support: (1) long term growth rates are not equal for all firms, but the differences are small and not size-related except for the smallest firms, and (2) the size distributions better approximate lognormal when the smallest firms are excluded, but in no case does the variance rise over time. This suggests that for most other industries, where nonrandom growth should be much stronger, GL would seem unlikely to play more than a minor role in portraying actual firm growth or the evolution of market structure. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • James Giordano, 2010. "Gibrat’s Law with Mild Nonrandom Growth," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(2), pages 197-208, June.
    • Handle: RePEc:kap:atlecj:v:38:y:2010:i:2:p:197-208
    DOI: 10.1007/s11293-010-9224-4
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    References listed on IDEAS

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    1. D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 301-324, May.
    2. José Calvo, 2006. "Testing Gibrat’s Law for Small, Young and Innovating Firms," Small Business Economics, Springer, vol. 26(2), pages 117-123, March.
    3. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-674, August.
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    More about this item

    Keywords

    Gibrat’s Law; Homogeneous firms; Nonrandom growth; Lognormal size distribution; L10; L60;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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