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New Evidence on Gibrat’s Law for Cities

González-Val, Rafael and Lanaspa, Luis and Sanz, Fernando (2012): New Evidence on Gibrat’s Law for Cities.

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Abstract

The aim of this work is to test empirically the validity of Gibrat’s law on the growth of cities, using data on the complete distribution of cities (without size restrictions) from three countries (the US, Spain and Italy) for the entire twentieth century. In order to achieve this, different techniques are used. First, panel data unit root tests tend to confirm the validity of Gibrat’s law in the upper-tail distribution. Second, when the entire distribution is considered using nonparametric methods, it is found that Gibrat’s law does not hold exactly in the long-term (in general, size affects the variance of the growth process but not its mean). Moreover, the lognormal distribution works well as a description of city size distributions across the whole century when no truncation point is considered.

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