Econometrica: Apr 1967, Volume 35, Issue 2
A Model of Business Firm Growth
Herbert A. Simon, Yuji IjiriA new method is proposed for deriving skew distributions of business firm sizes from the assumption of Gibrat's Law. The growth of the firm is decomposed into an industry-wide component and an individual component, the latter governed by a one-period Markov process. The model is fitted to data on the recent growth of large American firms.
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