Modeling the Firm-Size Distribution Using Box-Cox Heteroscedastic Regression

• Main Authors: YANG, Zhenlin, TSE, Yiu Kuen
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2004
• Subjects: Box-Cox transformation; Firm-size distribution; Quantile regression; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/784; https://ink.library.smu.edu.sg/context/soe_research/article/1783/viewcontent/fs_paper.pdf
• Institution: Singapore Management University

Using the Box-Cox regression model with heteroscedasticity (BCHR), we re‐examine the size distribution of the Portuguese manufacturing firms studied by Machado and Mata (2000) using the Box-Cox quantile regression (BCQR) method. We show that the BCHR model compares favourably against the BCQR method. In particular, the BCHR model can answer the key questions addressed by the BCQR method, with the advantage that the estimated quantile functions are monotonic. Furthermore, confidence intervals of the regression quantiles are easy to compute, and the estimation of the Box-Cox heteroscedastic regression is straight forward.