On the Irreconcilability of Pareto and Gibrat Laws

Abstract

If business firms face a multiplicative growth process in which their growth rates are independent from their sizes, then these sizes cannot be distributed according to a stationary Pareto distribution. At the same time , the Laplace distribution of growth rates cannot be easily reconciled with a Pareto distribution of firm sizes. Recent contributions, using formal arguments, seems to contrast these statements. We prove that the proposed formal results are wrong.Firm Growth, Gibrat's Law, Power law distribution, Laplace distribution.