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.
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Acknowledgements
I thank David Green, Ken Hendricks, George Kondor, John Spraggon, the editor and two anonymous referees, as well as seminar participants at Lakehead University and the empirical microeconomics lunch workshop at UBC for very helpful comments and discussions. I am especially grateful to Garnett Picot and the BLMA division of Statistics Canada for access to the T2LEAP data and their gracious hospitality. I acknowledge the financial support provided by SSHRC (MCRI grant 412–98-0025). All remaining errors are the author’s.
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Petrunia, R. Does Gibrat’s Law Hold? Evidence from Canadian Retail and Manufacturing Firms. Small Bus Econ 30, 201–214 (2008). https://doi.org/10.1007/s11187-006-9042-x
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DOI: https://doi.org/10.1007/s11187-006-9042-x