Testing the relationship between the growth of firms and the growth of the economy

Laura Rondi and Alessandro Sembenelli

International Journal of Industrial Organization, 1991, vol. 9, issue 2, 251-259

Abstract: On the account of the growing attention towards the role of large enterprises overall economy as well as the investigation of micro-to-macro interfaces, this paper proposes an econometric test of the existing long run relationship between the growth of the economy and the growth of a group of Italian industrial firms. To this purpose we attempt an inquiry into the direction of the causality between the expansion paths of the firms and of the economy. After testing the hypothesis of co-integration between the growth of the firms and the growth of the economy, an Error Correction Model is estimated. Having found that the hypothesis of weak exogeneity of the firms cannot be rejected, a confirmation of the assumptions that assign an active role to large companies in driving the growth of the economy is given.

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:9:y:1991:i:2:p:251-259

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