A new GLO Discussion Paper reconciles early and current literature testing Gibrat’s law.
GLO Discussion Paper No. 1248, 2023
The Law of Proportionate Effect: A test based on the graphical model methodology – Download PDF
by Guerzoni, Marco & Riso, Luigi & Vivarelli, Marco
GLO Fellow Marco Vivarelli
Author Abstract: Using both regression analysis and an unsupervised graphical model approach (never applied before to this issue), we confirm the rejection of the Gibrat’s law when our firm-level data are considered over the entire investigated period, while the opposite is true when we allow for market selection. Indeed, the growth behavior of the re-shaped (smaller) population of the survived most efficient firms is in line with the Law of Proportionate Effect; this evidence reconciles early and current literature testing Gibrat’s law and may have interesting implications in terms of both applied and theoretical research.
Vol. 36, Issue 2, April 2023: Journal of Population Economics (JOPE) 16 articles.
Vol. 36, Issue 1, January 2023: Journal of Population Economics (JOPE) 16 articles. https://link.springer.com/journal/148/volumes-and-issues/36-1
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