Gibrat's Law: Are the Services Different?
30 Pages Posted: 21 Feb 2003
Date Written: 22 2002 1,
Several noted surveys on intra-industry dynamics have recently reached the conclusion from a large body of evidence that Gibrat's Law does not hold. However, almost all of these studies have been based on manufacturing. There are compelling reasons to doubt whether these findings hold for the services. In this paper we examine whether the basic tenet underlying Gibrat's Law - that growth rates are independent of firm size - can be rejected for the services as it has been for manufacturing. Based on a large sample of Dutch firms the evidence suggests that growth rates are, in fact, independent of firm size. Validation of Gibrat's Law in the services suggests that the dynamics of industrial organisation for services may not simply mirror that for manufacturing.
Keywords: firm growth, service industries, Gibrat's Law
JEL Classification: M, L20, D21
Suggested Citation: Suggested Citation