The upper tail of the firm size distribution is often assumed to follow a Power Law. Several recent papers, using different estimators and different data sets, conclude that the Zipf Law, in particular, provides a good fit, implying that the fraction of firms with size above a given value is inversely proportional to the value itself. In this article we compare the asymptotic and small sample properties of different methods through which this conclusion has been reached. We find that the family of estimators most widely adopted, based on an OLS regression, is in fact unreliable and basically useless for appropriate inference. This finding raises doubts about previously identified Zipf behavior. Based on extensive numerical analysis, we recommend the adoption of the Hill estimator over any other method when individual observations are available.

Bottazzi, G., Pirino, D., Tamagni, F. (2015). Zipf law and the firm size distribution: A critical discussion of popular estimators. JOURNAL OF EVOLUTIONARY ECONOMICS, 25(3), 585-610 [10.1007/s00191-015-0395-7].

Zipf law and the firm size distribution: A critical discussion of popular estimators

BOTTAZZI, GIOVANNI;Pirino D.;
2015-01-01

Abstract

The upper tail of the firm size distribution is often assumed to follow a Power Law. Several recent papers, using different estimators and different data sets, conclude that the Zipf Law, in particular, provides a good fit, implying that the fraction of firms with size above a given value is inversely proportional to the value itself. In this article we compare the asymptotic and small sample properties of different methods through which this conclusion has been reached. We find that the family of estimators most widely adopted, based on an OLS regression, is in fact unreliable and basically useless for appropriate inference. This finding raises doubts about previously identified Zipf behavior. Based on extensive numerical analysis, we recommend the adoption of the Hill estimator over any other method when individual observations are available.
2015
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-S/06 - METODI MATEMATICI DELL'ECONOMIA E DELLE SCIENZE ATTUARIALI E FINANZIARIE
English
Firm size distribution; Hill estimator; Power-like distribution; Tail estimators; Zipf Law
Bottazzi, G., Pirino, D., Tamagni, F. (2015). Zipf law and the firm size distribution: A critical discussion of popular estimators. JOURNAL OF EVOLUTIONARY ECONOMICS, 25(3), 585-610 [10.1007/s00191-015-0395-7].
Bottazzi, G; Pirino, D; Tamagni, F
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/214755
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