Does Gibrat's Law Hold? Evidence from Canadian Retail and Manufacturing Firms

26 Pages Posted: 24 Feb 2006

See all articles by Robert J. Petrunia

Robert J. Petrunia

Lakehead University - Department of Economics

Date Written: July 2005

Abstract

This paper investigates the validity of Gibrat's Law holding for firms in manufacturing and retail trade sectors. The object is to expand our knowledge of Gibrat's Law to include non-manufacturing firms. A unique longitudinal firm-level database, which contains information on Canadian incorporated establishments, enables the inter-industry comparison. The findings of the analysis are that Gibrat's Law is violated in both manufacturing and retail sectors. Violations of Gibrat's Law for both sectors include (i) growth rates that depend on firm size (ii) growth variability that depends on firm size and (iii) a negative persistence of firm growth. Finally, age effects or selection effects are not the causes of these violations.

Keywords: firm growth, retail trade, manufacturing, Gibrat's Law

JEL Classification: D21, L11, L60, L80

Suggested Citation

Petrunia, Robert J., Does Gibrat's Law Hold? Evidence from Canadian Retail and Manufacturing Firms (July 2005). Available at SSRN: https://ssrn.com/abstract=882830 or http://dx.doi.org/10.2139/ssrn.882830

Robert J. Petrunia (Contact Author)

Lakehead University - Department of Economics ( email )

Thunder Bay, P7B 5E1
Canada

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