Zipf's law and maximum sustainable growth

Yannick Malevergne, A. Saichev and D. Sornette

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 6, 1195-1212

Abstract: Zipf's law states that the number of firms with size greater than S is inversely proportional to S. Most explanations start with Gibrat's rule of proportional growth but require additional constraints. We show that Gibrat's rule, at all firm levels, yields Zipf's law under a balance condition between the effective growth rate of incumbent firms (which includes their possible demise) and the growth rate of investments in entrant firms. Under the additional assumption that firms do not consume more resources than available, we show that Zipf's law is the signature that firms grow at the maximum reachable long-term rate.

Keywords: Firm growth; Gibrat's law; Zipf's law (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Zipf's law and maximum sustainable growth (2013)
Working Paper: Zipf's law and maximum sustainable growth (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:6:p:1195-1212

DOI: 10.1016/j.jedc.2013.02.004

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