Yang, Jangho and Heinrich, Torsten and Winkler, Julian and Lafond, François and Koutroumpis, Pantelis and Farmer, J. Doyne (2019): Measuring productivity dispersion: a parametric approach using the Lévy alphastable distribution.

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Abstract
Productivity levels and growth are extremely heterogeneous among firms. A vast literature has developed to explain the origins of productivity shocks, their dispersion, evolution and their relation ship to the business cycle. We examine in detail the distribution of labor productivity levels and growth, and observe that they exhibit heavy tails. We propose to model these distributions using the four parameter Lévy stable distribution, a natural candidate deriving from the generalised Central Limit Theorem. We show that it is a better fit than several standard alternatives, and is remarkably consistent over time, countries and sectors. In all samples considered, the tail parameter is such that the theoretical variance of the distribution is infinite, so that the sample standard deviation increases with sample size. We find a consistent positive skewness, a markedly different behaviour between the left and right tails, and a positive relationship between productivity and size. The distributional approach allows us to test different measures of dispersion and find that productivity dispersion has slightly decreased over the past decade.
Item Type:  MPRA Paper 

Original Title:  Measuring productivity dispersion: a parametric approach using the Lévy alphastable distribution 
Language:  English 
Keywords:  productivity, dispersion, distribution, heavytail, Lévy stable distribution 
Subjects:  D  Microeconomics > D2  Production and Organizations J  Labor and Demographic Economics > J2  Demand and Supply of Labor > J24  Human Capital ; Skills ; Occupational Choice ; Labor Productivity O  Economic Development, Innovation, Technological Change, and Growth > O3  Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights R  Urban, Rural, Regional, Real Estate, and Transportation Economics > R1  General Regional Economics > R12  Size and Spatial Distributions of Regional Economic Activity 
Item ID:  96474 
Depositing User:  Torsten Heinrich 
Date Deposited:  18 Oct 2019 07:19 
Last Modified:  18 Oct 2019 07:19 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/96474 