A Note on Gibrat's Law, Gibrat's Legacy and Firm Growth: Evidence from Brazilian Companies

Economics Bulletin, 2007, vol. 12, issue 19, pages 1-7

Abstract: The aim of this work is to test the Gibrat's Law hypothesis for Brazilian firms. Gibrat's Law establishes that firm growth is a random walk, it means that the probability of a given proportionale change in size during a specified period is the same for all firms in a given industry. This work uses information from manufacturing and services sectors, and it uses two different variables to compute firm growth: The growth of employment and the growth of value added. Gibrat's Law was rejected for the complete sample of manufacturing and services firms - the smaller companies grow at larger rates. On the other hand, Gibrat's Law is supported in both sectors when a subsample of large and well-established companies is used (Gibrat's Legacy). These results corroborate the recent stylized facts of the literature.

Keywords: Firm Growth; Firm Size; Gibrat´s Law; Gibrat's Legacy. (search for similar items in EconPapers)
JEL-codes: L1 L2 (search for similar items in EconPapers)
Date: 2007 Written 2007-09-05

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