From Gibrat’s law to Zipf’s law through cointegration?

Lalanne Aurélie and Martin Zumpe

Economics Letters, 2020, vol. 192, issue C

Abstract: This article investigates the role of cointegration in the context of urban growth processes. It proposes the use of cointegration tests to distinguish between two versions of Gibrat’s law: a standard formalization with growth shocks that are iid across time and cities, and an alternative one with shocks that are only iid over time. It then shows that city-size distributions converge to Zipf’s law under the standard version of Gibrat’s law; in contrast, they are perfectly preserved under the alternative formalization. An empirical application to French data provides support for non-cointegrated city growth, and thus for the standard formalization.

Keywords: Gibrat’s law; Zipf’s law; Cointegration tests; Unit-root tests; Urban growth; Urban system (search for similar items in EconPapers)
JEL-codes: C41 O40 R00 R11 (search for similar items in EconPapers)
Date: 2020
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Working Paper: From Gibrat's law to Zipf's law through cointegration? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:192:y:2020:i:c:s0165176520301531

DOI: 10.1016/j.econlet.2020.109211

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