Does Gibrat’s law hold amongst dairy farmers in Northern Ireland?

Philip Kostov, Myles Patton, Joan Moss and Seamus McErlean ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper tests whether the Law of Proportionate Effects (Gibrat, 1931), which states that farms grow at a rate that is independent of their size, holds for the dairy farms in Northern Ireland. Previous studies have tended to concentrate on testing whether the law holds for all farms. The methodology used in this study permits investigation of whether the law holds for some farms or all farms according to their size. The approach used avoids the subjective splitting of samples, which tends to bias results. Additionally we control for the possible sample selection bias. The findings show that the Gibrat law does hold except in the case of small farms. This is in accordance with previous findings that Gibrat’s law tends to hold when only larger farms are considered, but tends to fail when smaller farms are included in the analysis. Implications and further extensions, as well as some alternatives to the proposed methodology are discussed.

Keywords: law; quantile regression; Integrated conditional moments test (search for similar items in EconPapers)
JEL-codes: C12 C14 O49 (search for similar items in EconPapers)
Date: 2006-10-02
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Does Gibrat's Law Hold Amongst Dairy Farmers in Northern Ireland? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3370

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