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Estimating the Size Distribution of Firms Using Government Summary Statistics

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  • Golan, Amos
  • Judge, George
  • Perloff, Jeffrey M

Abstract

Using a maximum entropy technique, the authors estimate the market shares of each firm in an industry using the available government summary statistics such as the four-firm concentration ratio and the Herfindahl-Hirschmann Index. They show that their technique is very effective in estimating the distribution of market shares in twenty industries. The authors' results provide support for the recent practice of using the Herfindahl-Hirschmann Index rather than four-firm concentration ratio as the key explanatory variable in many market power studies, if only one measure is to be used. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Golan, Amos & Judge, George & Perloff, Jeffrey M, 1996. "Estimating the Size Distribution of Firms Using Government Summary Statistics," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 69-80, March.
    • Handle: RePEc:bla:jindec:v:44:y:1996:i:1:p:69-80
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    References listed on IDEAS

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    1. Zellner, A., 1988. "Optimal Information-Processing And Bayes' Theorem," Papers m8803, Southern California - Department of Economics.
    2. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-369, June.
    3. Kwoka, John E, Jr, 1979. "The Effect of Market Share Distribution on Industry Performance," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 101-109, February.
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