The Law of Proportionate Effect: A test based on the graphical model methodology

Marco Guerzoni, Luigi Riso and Marco Vivarelli ()

No 1248, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: Using both regression analysis and an unsupervised graphical model approach (never applied before to this issue), we confirm the rejection of the Gibrat's law 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 re-shaped (smaller) population of the survived most efficient firms is in line with the Law of Proportionate Effect; this evidence reconciles early and current literature testing Gibrat's law and may have interesting implications in terms of both applied and theoretical research.

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: 2023
New Economics Papers: this item is included in nep-bec and nep-tid
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Working Paper: The Law of Proportionate Effect: A test based on the graphical model methodology (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1248

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