Panel tests of Gibrat's Law for Japanese manufacturing

J  Goddard; J  Wilson; P  Blandon

doi:10.1016/S0167-7187(00)00085-0

Panel tests of Gibrat's Law for Japanese manufacturing

J Goddard, J Wilson, P Blandon

Centre for Responsible Banking and Finance

Research output: Contribution to journal › Article › peer-review

Abstract

The properties of the standard cross sectional test of the Law of Proportionate Effect (LPE) are compared with those of three alternative panel unit root tests, using Monte Carlo methods. The cross sectional procedure produces biased parameter estimates and the test suffers from a loss of power if there are heterogeneous individual firm effects. Suitably designed panel tests avoid these difficulties. Empirical results for a panel of Japanese manufacturing firms provides some support for the notion that log firm sizes are mean-reverting towards heterogeneous equilibrium values, and that the LPE should be rejected. (C) 2002 Elsevier Science B.V. All rights reserved.

Original language	English
Pages (from-to)	415-433
Number of pages	19
Journal	International Journal of Industrial Organization
Volume	20
Issue number	3
DOIs	https://doi.org/10.1016/S0167-7187(00)00085-0
Publication status	Published - Mar 2002

Keywords

Gibrat's Law
panel
unit root
FIRM GROWTH
CONVERGENCE
SIZE
EMPIRICS

Access to Document

10.1016/S0167-7187(00)00085-0

Cite this

@article{987128f8991f4634b3e57fd7b5674b2f,

title = "Panel tests of Gibrat's Law for Japanese manufacturing",

abstract = "The properties of the standard cross sectional test of the Law of Proportionate Effect (LPE) are compared with those of three alternative panel unit root tests, using Monte Carlo methods. The cross sectional procedure produces biased parameter estimates and the test suffers from a loss of power if there are heterogeneous individual firm effects. Suitably designed panel tests avoid these difficulties. Empirical results for a panel of Japanese manufacturing firms provides some support for the notion that log firm sizes are mean-reverting towards heterogeneous equilibrium values, and that the LPE should be rejected. (C) 2002 Elsevier Science B.V. All rights reserved.",

keywords = "Gibrat's Law, panel, unit root, FIRM GROWTH, CONVERGENCE, SIZE, EMPIRICS",

author = "J Goddard and J Wilson and P Blandon",

year = "2002",

month = mar,

doi = "10.1016/S0167-7187(00)00085-0",

language = "English",

volume = "20",

pages = "415--433",

journal = "International Journal of Industrial Organization",

issn = "0167-7187",

publisher = "Elsevier Inc.",

number = "3",

}

TY - JOUR

T1 - Panel tests of Gibrat's Law for Japanese manufacturing

AU - Goddard, J

AU - Wilson, J

AU - Blandon, P

PY - 2002/3

Y1 - 2002/3

N2 - The properties of the standard cross sectional test of the Law of Proportionate Effect (LPE) are compared with those of three alternative panel unit root tests, using Monte Carlo methods. The cross sectional procedure produces biased parameter estimates and the test suffers from a loss of power if there are heterogeneous individual firm effects. Suitably designed panel tests avoid these difficulties. Empirical results for a panel of Japanese manufacturing firms provides some support for the notion that log firm sizes are mean-reverting towards heterogeneous equilibrium values, and that the LPE should be rejected. (C) 2002 Elsevier Science B.V. All rights reserved.

AB - The properties of the standard cross sectional test of the Law of Proportionate Effect (LPE) are compared with those of three alternative panel unit root tests, using Monte Carlo methods. The cross sectional procedure produces biased parameter estimates and the test suffers from a loss of power if there are heterogeneous individual firm effects. Suitably designed panel tests avoid these difficulties. Empirical results for a panel of Japanese manufacturing firms provides some support for the notion that log firm sizes are mean-reverting towards heterogeneous equilibrium values, and that the LPE should be rejected. (C) 2002 Elsevier Science B.V. All rights reserved.

KW - Gibrat's Law

KW - panel

KW - unit root

KW - FIRM GROWTH

KW - CONVERGENCE

KW - SIZE

KW - EMPIRICS

UR - http://www.scopus.com/inward/record.url?scp=31244437610&partnerID=8YFLogxK

U2 - 10.1016/S0167-7187(00)00085-0

DO - 10.1016/S0167-7187(00)00085-0

M3 - Article

SN - 0167-7187

VL - 20

SP - 415

EP - 433

JO - International Journal of Industrial Organization

JF - International Journal of Industrial Organization

IS - 3

ER -

Panel tests of Gibrat's Law for Japanese manufacturing

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this