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Global evidence on the distribution of economic profit rates

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  • Williams, Michael A.
  • Baek, Grace
  • Park, Leslie Y.
  • Zhao, Wei

Abstract

Gibrat (1931) initiated the study of the distribution of firms’ profit rates, suggesting the distribution was log-normal. Although initial empirical work supported that finding, a consensus has developed in the literature that the distribution of firm profit rates is best approximated by the Laplace distribution. Using a richer database than prior studies and testing for more theoretical distributions, we find that the distribution of firm profit rates is best approximated by the heavier-tailed Cauchy distribution.

Suggested Citation

  • Williams, Michael A. & Baek, Grace & Park, Leslie Y. & Zhao, Wei, 2016. "Global evidence on the distribution of economic profit rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 458(C), pages 356-363.
    • Handle: RePEc:eee:phsmap:v:458:y:2016:i:c:p:356-363
    DOI: 10.1016/j.physa.2016.04.027
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    Cited by:

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    2. Sandro Claudio Lera & Didier Sornette, 2017. "GDP growth rates as confined L\'evy flights," Papers 1709.05594, arXiv.org.
    3. Williams, Michael A. & Baek, Grace & Li, Yiyang & Park, Leslie Y. & Zhao, Wei, 2017. "Global evidence on the distribution of GDP growth rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 468(C), pages 750-758.

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