PLANT-LEVEL ANALYSIS USING THE ARD: ANOTHER LOOK AT GIBRAT'S LAW

This study uses the Annual Respondents Database to test whether Gibrat's law of proportionate effect holds for the UK manufacturing industry during the period 1973-1998. For a sample of manufacturing industries, four different panel unit root tests were carried out to test the relationship between growth and size for three measures of size: gross output, employment and gross value added. The tests were applied to unbalanced plant-level panel data. The results show that there is strong evidence to reject Gibrat's law that firm growth is a random process in favour of the alternative proposition of mean reversion. Copyright (c) Scottish Economic Society 2005.