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Evidence and Implications of Zipf’s Law for Integrated Economies

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Author Info
Harry P. Bowen ()
Haris Munandar ()
Jean-Marie Viaene ()

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Abstract

This paper considers the distribution of output and productive factors among members of a fully integrated economy (FIE). We demonstrate that each member’s shares of total output and of total factors will be equal. This implies that growth in shares is random. If output and factor shares evolve as reflective geometric Brownian motion, then limiting distribution of these shares will exhibit Zipf’s law. Our empirics support Zipf’s law for U.S. states and for E.U. countries. These findings imply that models characterizing growth of members within an FIE should embody a key assumption: growth process of shares is random and homogeneous.

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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1743.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1743

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Related research
Keywords: growth economic integration factor price equalization Zipf’s law

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Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
F15 - International Economics - - Trade - - - Economic Integration
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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