Was Robert Gibrat right? A test based on the graphical model methodology

Marco Guerzoni, Luigi Riso and Marco Vivarelli ()
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Marco Guerzoni: University of Milano-Bicocca

Small Business Economics, 2025, vol. 64, issue 2, No 10, 475-488

Abstract: Abstract Using both regression analysis and an unsupervised graphical model approach (never applied before to this issue), we confirm the rejection of Gibrat’s Law (stating that a firm’s growth is independent of that firm’s initial size) when our firm-level data are considered over the entire investigated period, while the opposite is true when we allow for market selection; indeed, the growth behavior of the surviving most efficient firms is in line with Gibrat’s Law. This evidence reconciles early and current literature and may have interesting implications in terms of both theoretical research and policy suggestions regarding subsidies to small firms, which do not necessarily grow faster than their larger counterparts.

Keywords: Gibrat’s Law; Firm survival; Market selection; Firm growth (search for similar items in EconPapers)
JEL-codes: L11 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Was Robert Gibrat right? A test based on the graphical model methodology (2023)
Working Paper: Was Robert Gibrat Right? A Test Based on the Graphical Model Methodology (2023)
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DOI: 10.1007/s11187-024-00915-1

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