Testing Gibrat's law in Italian macro-regions: Analysis on a panel of mechanical companies

P. Ganugi (), Luigi Grossi and G. Gozzi ()
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P. Ganugi: Università cattolica S. Cuore di Piacenza
G. Gozzi: Università di Parma

Statistical Methods & Applications, 2005, vol. 14, issue 1, No 8, 126 pages

Abstract: Abstract The present paper deals with the question whether “Gibrat's law” is applicable to Italian mechanical companies active between 1997 and 1999 or not. The analysis was carried out at a spatial level splitting companies in four macro-regions: North-West, North-East, Centre and South. On the basis of a set of descriptive and inferential tools, we find that firm size, measured by total assets, follows approximately a log-normal distribution in at least two of the four analyzed macro-regions. Nevertheless log-normality is only one necessary but not sufficient condition for the validity of the Gibrat's law. Thus we analyzed the influence of firm size on growth rate finding a negative relation between the two variables in all macro-regions. This is a clear violation of Gibrat's law. Another violation was found by the application of an econometric model which evidences the persistence of growth.

Keywords: Gibrat's law; firm growth rate distribution; firm size distribution; L11; L25; D21 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/BF02511577

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