When is Gibrat’s law a law?
The purpose of this article 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 five-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 efficient scale, market concentration rate, and number of young firms in the industry—matters for whether Gibrat’s law is rejected or not.
KeywordsFirm growth Firm size Job creation Small firms
JEL ClassificationsD22 L11 L25 L26
We would like to thank Daniel Halvarsson, two anonymous referees, and participants at the 2010 Ratio Colloquium for Young Social Scientists for valuable comments.
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