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Revisiting Gibrat's law using panel SURADF tests

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  • Hsiao-Ping Chu
  • Peter Sher
  • Ming-Liang Yeh

Abstract

In this study, the newly-developed Panel SURADF tests advanced by Breuer et al. (2001) are used to investigate whether the growth rate of electronics firms is independent of their size, as postulated by Gibrat's (1931) Law of Proportionate Effects. Time-series data for the total assets of 48 electronic firms in Taiwan during the 1995-2004 period are used. Whereas 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 Panel SURADF tests investigate a separate unit root null hypothesis for each individual panel member and are, therefore, able to identify how many and which series in the panel are stationary processes. The empirical results from several panel-based unit root tests indicate that the total assets of all firms studied here are nonstationary, implying that Gibrat's Law holds for all 48 firms; however, Breuer et al.'s (2001) Panel SURADF tests unequivocally indicate that Gibrat's Law is only valid for 27 of those firms.

Suggested Citation

  • Hsiao-Ping Chu & Peter Sher & Ming-Liang Yeh, 2007. "Revisiting Gibrat's law using panel SURADF tests," Applied Economics Letters, Taylor & Francis Journals, vol. 15(2), pages 137-143.
    • Handle: RePEc:taf:apeclt:v:15:y:2007:i:2:p:137-143
    DOI: 10.1080/13504850600706339
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    Cited by:

    1. repec:ebl:ecbull:v:6:y:2008:i:32:p:1-8 is not listed on IDEAS
    2. Caterina Giannetti, 2015. "Unit roots and the dynamics of market shares: an analysis using an Italian banking micro-panel," Empirical Economics, Springer, vol. 48(2), pages 537-555, March.
    3. Ahmad Zubaidi Baharumshah & Darja Borsic, 2008. "Purchasing power parity in Central and Eastern European countries," Economics Bulletin, AccessEcon, vol. 6(32), pages 1-8.

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