Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/48826 
Year of Publication: 
2011
Series/Report no.: 
Economics Discussion Papers No. 2011-29
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
We 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.
Subjects: 
Econophysics
power-law distributions
power-law exponents
firm size variables
finite size effect
JEL: 
C16
C18
D20
E23
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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