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Measuring productivity dispersion: a parametric approach using the Lévy alpha-stable distribution

Author

Listed:
  • Jangho Yang
  • Torsten Heinrich
  • Julian Winkler
  • François Lafond
  • Pantelis Koutroumpis
  • J. Doyne Farmer

Abstract

It is well known that value added (VA) per worker is extremely heterogeneous among firms, but relatively little has been done to characterize this heterogeneity more precisely. Here, we show that the distribution of VA per worker exhibits heavy tails, a very large support, and consistently features a proportion of negative values, which prevents log transformation. We propose to model the distribution of VA per worker using the four-parameter Lévy stable distribution, a natural candidate deriving from the generalized central limit theorem, and we show that it is a better fit than key alternatives. Fitting a distribution allows us to capture dispersion through the tail exponent and scale parameters separately. We show that these parametric measures of dispersion can be useful to characterize the evolution of dispersion in recent years.

Suggested Citation

  • Jangho Yang & Torsten Heinrich & Julian Winkler & François Lafond & Pantelis Koutroumpis & J. Doyne Farmer, 2025. "Measuring productivity dispersion: a parametric approach using the Lévy alpha-stable distribution," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 34(1), pages 79-117.
    • Handle: RePEc:oup:indcch:v:34:y:2025:i:1:p:79-117.
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    File URL: http://hdl.handle.net/10.1093/icc/dtae021
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    Cited by:

    1. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    2. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Growth, development, and structural change at the firm-level: The example of the PR China," Papers 2012.14503, arXiv.org.
    3. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2020. "Levels of structural change: An analysis of China's development push 1998-2014," Papers 2005.01882, arXiv.org, revised Sep 2020.
    4. Torsten Heinrich & Jangho Yang & Shuanping Dai, 2022. "Levels of structural change," Journal of Evolutionary Economics, Springer, vol. 32(1), pages 35-86, January.
    5. Bacilieri, Andrea & Astudillo-Estévez, Pablo, 2023. "Reconstructing firm-level input-output networks from partial information," INET Oxford Working Papers 2023-05, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, revised Jan 2025.
    6. Schulz, Jan & Weber, Jan David, 2025. "Power laws in socio-economics," BERG Working Paper Series 203, Bamberg University, Bamberg Economic Research Group.

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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