Firm growth and firm size

Abstract

This article analyses the growth rates of the complete population of UK-registered firms for the period 2001 to 2005. We estimate Gibrat's law – that growth rates are independent of firm size – by deciles of the firm size distribution. Whether we are able to reject Gibrat's law varies across deciles. We also show how estimates vary according to the measure of firm size, time period and sample selection.

Notes

¹In fact, interest in Gibrat's law extends beyond corporate growth rates. Resende (2009) uses it as a basis for studying population growth in medieval England.

²These authors have around 210 000 firms in their overall sample, although it is not clear how many firms there are in the population.

³In the remainder of this article, we use firms to mean registered firms. Hence firm refers to the legal entity that organizes production in contrast to census-type data that use the plant or production unit.

⁴See, for example, Evans (1987).