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Size distributions reconsidered

Size distributions reconsidered
Size distributions reconsidered
We consider tests of the hypothesis that the tail of size distributions decays faster than any power function. These are based on a single parameter that emerges from the Fisher-Tippett limit theorem, and discriminate between leading laws considered in the literature without requiring fully parametric models/specifications. We study the pro- posed tests taking into account the higher order regular variation of the size distribution that can lead to catastrophic distortions. The theoretical bias corrections re-align successfully nominal and empirical test behavior, and inform a sensitivity analysis for practical work. The methods are used in an examination of the size distribution of cities and firms.
size distribution, tail behavior, power law, extreme value index
0747-4938
1-16
Schluter, Christian
ae043254-4cc4-48aa-abad-56a36554de2b
Trede, Mark
7233d600-13a2-4c24-ae9d-16aed9bfca30
Schluter, Christian
ae043254-4cc4-48aa-abad-56a36554de2b
Trede, Mark
7233d600-13a2-4c24-ae9d-16aed9bfca30

Schluter, Christian and Trede, Mark (2018) Size distributions reconsidered. Econometric Reviews, 1-16. (doi:10.1080/07474938.2017.1417732).

Record type: Article

Abstract

We consider tests of the hypothesis that the tail of size distributions decays faster than any power function. These are based on a single parameter that emerges from the Fisher-Tippett limit theorem, and discriminate between leading laws considered in the literature without requiring fully parametric models/specifications. We study the pro- posed tests taking into account the higher order regular variation of the size distribution that can lead to catastrophic distortions. The theoretical bias corrections re-align successfully nominal and empirical test behavior, and inform a sensitivity analysis for practical work. The methods are used in an examination of the size distribution of cities and firms.

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16_01_2018_Size distr - Accepted Manuscript
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More information

Accepted/In Press date: 27 November 2017
e-pub ahead of print date: 2 January 2018
Keywords: size distribution, tail behavior, power law, extreme value index

Identifiers

Local EPrints ID: 416995
URI: http://eprints.soton.ac.uk/id/eprint/416995
ISSN: 0747-4938
PURE UUID: 0b070a1b-66eb-445c-8ee4-d8d5caa6860d

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Date deposited: 16 Jan 2018 17:30
Last modified: 20 Jul 2019 04:36

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