Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 99: Does Gibrat’s Law Hold for Swedish Energy Firms?

Ali Tang ()
Additional contact information
Ali Tang: HUI Research, Postal: HUI Research, SE-10329, Stockholm, Sweden and Dalarna University, SE-79188 Falun, Sweden,

Abstract: Gibrat’s law predicts that firm growth is purely random and should be independent of firm size. We use a random effects–random coefficient model to test whether Gibrat’s law holds at the firm level in the Swedish energy market. No study has investigated whether Gibrat’s law holds for individual firms in the energy sector. The present results support the claim that Gibrat’s law is more likely to be rejected ex ante when an entire firm population is considered, but more likely to be confirmed ex post after market selection has “cleaned” the original population of firms or when the analysis treats more disaggregated data. From a theoretical viewpoint, the results are consistent with models based on passive and active learning, indicating a steady state in the firm expansion process and that, before it is achieved, Gibrat’s law is violated in the short term, but holds in the long term when firms have reached a “steady state”. These results indicate that approximately 70% of firms in the Swedish energy sector are in steady state, with only random fluctuations in size around that level over the 15 studied years.

Keywords: firm size; firm growth; random coefficient; energy sector

JEL-codes: D22; L11; L25; L26

23 pages, January 29, 2014

Full text files

BinaryLoader.axd?Own....pdf&Attachment=True PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Helena Nilsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-02-05 20:50:25.