The Settlement of the United States, 1800 to 2000: The Long Transition Towards Gibrat's Law

41 Pages Posted: 8 Mar 2013 Last revised: 6 Mar 2015

See all articles by Klaus Desmet

Klaus Desmet

Southern Methodist University (SMU); Centre for Economic Policy Research (CEPR)

Jordan Rappaport

Federal Reserve Bank of Kansas City

Multiple version iconThere are 2 versions of this paper

Date Written: February 2015

Abstract

Gibrat's law, the orthogonality of growth to initial levels, is considered a stylized fact of local population growth. But throughout U.S. history, local population growth has significantly deviated from orthogonality. In earlier periods smaller counties strongly converged whereas larger counties moderately diverged. Over time, due to changes in the age composition of locations and net congestion, convergence dissipated and divergence weakened. Gibrat's law gradually emerged without fully attaining it. A simple one-sector model, with entry of new locations, a growth friction, and decreasing net congestion closely matches these and many other observed relationships. Our findings suggest that orthogonal growth is a consequence of reaching a steady state population distribution, rather than an explanation of that distribution.

Keywords: Gibrats Law, Zipfs Law, Local Growth, Convegence, Divergence

JEL Classification: R11, R12, O18, N91, N92

Suggested Citation

Desmet, Klaus and Rappaport, Jordan, The Settlement of the United States, 1800 to 2000: The Long Transition Towards Gibrat's Law (February 2015). Federal Reserve Bank of Kansas City Working Paper No. RWP 13-02. Available at SSRN: https://ssrn.com/abstract=2230064 or http://dx.doi.org/10.2139/ssrn.2230064

Klaus Desmet

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jordan Rappaport (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States
816-881-2018 (Phone)
816-881-2199 (Fax)

HOME PAGE: http://www.kansascityfed.org/speechbio/rappaport.cfm

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