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Modelling firm-size distribution using Box-Cox heteroscedastic regression

Author

Listed:
  • Y. K. Tse

    (School of Economics and Social Sciences, Singapore Management University, 90 Stamford Road, Singapore 178903)

  • Z. L. Yang

    (School of Economics and Social Sciences, Singapore Management University, 90 Stamford Road, Singapore 178903)

Abstract

Using the Box-Cox regression model with heteroscedasticity (BCHR), we re-examine the size distribution of the Portuguese manufacturing firms studied by Machado and Mata (2000) using the Box-Cox quantile regression (BCQR) method. We show that the BCHR model compares favourably against the BCQR method. In particular, the BCHR model can answer the key questions addressed by the BCQR method, with the advantage that the estimated quantile functions are monotonic. Furthermore, estimation of the BCHR model is straightforward and the confidence intervals of the BCHR regression quantiles are easy to compute. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Y. K. Tse & Z. L. Yang, 2006. "Modelling firm-size distribution using Box-Cox heteroscedastic regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 641-653.
    • Handle: RePEc:jae:japmet:v:21:y:2006:i:5:p:641-653
    DOI: 10.1002/jae.870
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    References listed on IDEAS

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    1. Sims,Christopher A. (ed.), 1994. "Advances in Econometrics," Cambridge Books, Cambridge University Press, number 9780521444606, October.
    2. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
    3. Sims,Christopher A. (ed.), 1994. "Advances in Econometrics," Cambridge Books, Cambridge University Press, number 9780521444590, October.
    4. Buchinsky, Moshe, 1995. "Quantile regression, Box-Cox transformation model, and the U.S. wage structure, 1963-1987," Journal of Econometrics, Elsevier, vol. 65(1), pages 109-154, January.
    5. Jose A. F. Machado & Jose Mata, 2000. "Box-Cox quantile regression and the distribution of firm sizes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 253-274.
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    More about this item

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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