Citation:
Gabaix X, Ibragimov R. Rank-1/2: A Simple Way to Improve the OLS Estimation of Tail Exponents. Journal of Business Economics and Statistics. 2011;29 (1) :24-39.
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| Online Appendix | 127 KB |
Abstract:
To estimate a Pareto exponent with an OLS regression, it's best to specify it with log(Rank-1/2)=a-b log(Size), and use the standard error s.e. (b)=b (2/n)^0.5, as OLS standard errors strongly biased.