On the irreconcilability of Pareto and Gibrat laws

If business firms face a multiplicative growth process in which their growth rates are Laplace distributed and independent from their sizes, the size cannot be distributed according to a stationary Pareto distribution. Recent contributions, using formal arguments, seem to contrast with these stateme...

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Bibliographic Details
Published inPhysica A Vol. 388; no. 7; pp. 1133 - 1136
Main Author Bottazzi, Giulio
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.04.2009
Subjects
Firm growth
Gibrat’s law
Laplace distribution
Power law distribution
Laplace distribution
Power law distribution
Firm growth
Gibrat’s law
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Summary:If business firms face a multiplicative growth process in which their growth rates are Laplace distributed and independent from their sizes, the size cannot be distributed according to a stationary Pareto distribution. Recent contributions, using formal arguments, seem to contrast with these statements. We prove that the proposed formal results are wrong.
ISSN:0378-4371
1873-2119
DOI:10.1016/j.physa.2008.12.031