The Korean Journal of Economic Studies
The Growth of Employment and Gibrat's Law
Jong In Yoon (Baekseok University)Year 2019Vol. 67No. 1
This article analyzes the growth of employment and tests Gibrat’s law in theemployment of Korean firms. It is reasonable to suppose that sample selectionbias plays an important role in the estimated results. Therefore, we utilize theprocedure in which a probit survival equation is first estimated to correct forsample selection bias. To test the validity of Gibrat’s law, we use Heckman’stwo-step estimator and Arellano and Bonhomme(2017)’s quantile selectionregression.Most of the results by Heckman’s procedure reject Gibrat’s law on anaggregate level, which means that small firms grow faster than large firms.But Gibrat’s law is confirmed more often than it is rejected for firms over acertain size(firms larger than 40% quantile). And for firms larger than 80%quantile, the results show that large firms grow faster than small firms.Results by quantile selection model show that the employment of medium-sizefirms growth faster than small and large firms. We think the results mighthighlight the validity of Zipf’s law in the employment of Korean firms.