Zipf Law and the Firm Size Distribution: a critical discussion of popular estimators

Giulio Bottazzi, Davide Pirino () and Federico Tamagni

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: The upper tail of the firm size distribution is often assumed to follow a Power Law behavior. Recently, using different estimators and on different data sets, several papers conclude that this distribution follows the Zipf Law, meaning that the fraction of firms whose size is above a given value is inversely proportional to the value itself. We compare the 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 rises some doubts about previously identified Zipf Laws. In general, when individual observations are available, we recommend the adoption of the Hill estimator over any other method.

Keywords: Firm size distribution; Zipf Law; Power-like distribution (search for similar items in EconPapers)
Date: 2013-07-12
New Economics Papers: this item is included in nep-bec and nep-ecm
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Citations: View citations in EconPapers (2)

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Journal Article: Zipf law and the firm size distribution: a critical discussion of popular estimators (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2013/17

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