Factors of Plant Growth: Evidence from the Taiwan Manufacturing Sector
Date Issued
2011
Date
2011
Author(s)
Lin, Cherng-Shiun
Abstract
Research into the growth dynamics of firms and the accompanying tests of Gibrat''s Law have had only limited consensus. Given that past results have been divergent, we perform a meta analysis and seek to summarize the large empirical literature written on this particular theme. Statistically, certain sample and research characteristics are found to play guiding roles in determining whether or not to reject Gibrat''s Law. Next, by using a sample of more than 32 thousand manufacturing plants in Taiwan between 1998 and 2003, we conduct OLS and random effects regressions to examine the relationships between the employment growth of plants and various factors pertaining to characteristics of the plants and their workers. The results suggest that employment growth decreases at diminishing rates with both plant size and plant age, so that Gibrat''s Law must be rejected while Jovanovic''s theory of firm growth holds. Labor productivity and capital intensity, on the other hand, are positively related to employment growth. We also find several worker characteristics to be indispensible for explaining growth of plants. Additional checks that look at each separate industry one at a time or an extended balanced panel of all plants up to the year 2005 show that the main results are quite robust.
Subjects
Plant growth
Meta analysis
Taiwan manufacturing sector
Random effects estimator
Worker characteristics
Type
thesis
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