A new method for measuring tail exponents of firm size distributions
AbstractWe propose a new method for estimating the power-law exponent of a firm size variable, such as annual sales. Our focus is on how to empirically identify a range in which a firm size variable follows a power-law distribution. As is well known, a firm size variable follows a power-law distribution only beyond some threshold. On the other hand, in almost all empirical exercises, the right end part of a distribution deviates from a power-law due to finite size effect. We modify the method proposed by Malevergne et al. (2011) so that we can identify both of the lower and the upper thresholds and then estimate the power-law exponent using observations only in the range defined by the two thresholds. We apply this new method to various firm size variables, including annual sales, the number of workers, and tangible fixed assets for firms in more than thirty countries. --
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2011-29.
Date of creation: 2011
Date of revision:
Econophysics; power-law distributions; power-law exponents; firm size variables; finite size effect;
Find related papers by JEL classification:
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
- D20 - Microeconomics - - Production and Organizations - - - General
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-22 (All new papers)
- NEP-BEC-2011-08-22 (Business Economics)
- NEP-ENT-2011-08-22 (Entrepreneurship)
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