Zipf's law and maximum sustainable growth

Yannick Malevergne, Alex Saichev and Didier Sornette

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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.

Date: 2013-06-01
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Citations: View citations in EconPapers (8)

Published in Journal of Economic Dynamics and Control, 2013, 37 (6), pp.1195-1212 P

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Journal Article: 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:hal:journl:hal-02313060

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