Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 47: Does Gibrat’s Law Hold for Retailing? Evidence from Sweden

Sven-Olov Daunfeldt (), Niklas Elert and Åsa Lang
Additional contact information
Sven-Olov Daunfeldt: The Ratio Institute (RATIO), Postal: P.O. Box 3203, SE-103 64 Stockholm, Sweden, and, Department of Economics, School of Technology and Business Studies, Dalarna University,, SE-781 88 Borlänge, Sweden.
Niklas Elert: The Ratio Institute (RATIO), Postal: P.O. Box 3203, SE-103 64 Stockholm, Sweden, and Department of Economics, Dalarna University, SE-781 88 Borlänge, Sweden.
Åsa Lang: School of Technology and Business Studies, Postal: Department of Business Administration, Dalarna University, SE-791 88 Borlänge, Sweden, and, Mid Sweden University, Department of Social Sciences, SE-831 25 Östersund, Sweden.

Abstract: Gibrat’s Law predicts that firm growth is a purely random effect and therefore should be independent of firm size. The purpose of this paper is to test Gibrat’s law within the retail industry, using a novel data-set comprising all Swedish limited liability companies active at some point between 1998 and 2004. Very few studies have previously investigated whether Gibrat’s Law seems to hold for retailing, and they are based on highly aggregated data. Our results indicate that Gibrat´s Law can be rejected for a large majority of five-digit retail industries in Sweden, since small retail firms tend to grow faster than large ones.

Keywords: firm dynamics; firm size; firm growth; retail industry

JEL-codes: L11; L25; L81

33 pages, January 1, 2011

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