2007/10 | LEM Working Paper Series | |
On the Irreconcilability of Pareto and Gibrat Laws |
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Giulio Bottazzi |
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Keywords | ||
Firm Growth, Gibrat's Law, Power law distribution, Laplace distribution.
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JEL Classifications | ||
L1,C1,D2
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Abstract | ||
If business firms face a multiplicative growth process in which their growth rates are independent from their sizes, then these sizes cannot be distributed according to a stationary Pareto distribution. At the same time , the Laplace distribution of growth rates cannot be easily reconciled with a Pareto distribution of firm sizes. Recent contributions, using formal arguments, seems to contrast these statements. We prove that the proposed formal results are wrong.
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