Chapter 11: The Controversy Over “Gibrat’s Law”

In this chapter, we consider one of the oldest research topics in the economics of small business, and a very long-running controversy. The earliest research in this area was done by a French engineer, Robert Gibrat, and has to do with the general rule he proposed and which is known as “Gibrat’s law.” But this is not a purely intellectual exercise. To understand “Gibrat’s law,” and to determine whether it is a good approximation to the truth, we need to understand how small businesses grow, and that is a key issue for economic policy with respect to small business.