TY - JOUR

T1 - Model choice and size distribution: a Bayequentist approach

AU - Engler, John-Oliver

AU - Baumgärtner, Stefan

PY - 2015/4

Y1 - 2015/4

N2 - We propose a new three-step model-selection framework for size distributions in empirical data. It generalizes a recent frequentist plausibility-of-fit analysis (Step 1) and combines it with a relative ranking based on the Bayesian Akaike Information Criterion (Step 2). We enhance these statistical criteria with the additional criterion of microfoundation (Step 3) which is to select the size distribution that comes with a dynamic micro model of size dynamics. A numerical performance test of Step 1 shows that our generalization is able to correctly rule out the distribution hypotheses unjustified by the data at hand. We then illustrate our approach, and demonstrate its usefulness, with a sample of commercial cattle farms in Namibia. In conclusion, the framework proposed here has the potential to reconcile the ongoing debate about size distribution models in empirical data, the two most prominent of which are the Pareto and the lognormal distribution.

AB - We propose a new three-step model-selection framework for size distributions in empirical data. It generalizes a recent frequentist plausibility-of-fit analysis (Step 1) and combines it with a relative ranking based on the Bayesian Akaike Information Criterion (Step 2). We enhance these statistical criteria with the additional criterion of microfoundation (Step 3) which is to select the size distribution that comes with a dynamic micro model of size dynamics. A numerical performance test of Step 1 shows that our generalization is able to correctly rule out the distribution hypotheses unjustified by the data at hand. We then illustrate our approach, and demonstrate its usefulness, with a sample of commercial cattle farms in Namibia. In conclusion, the framework proposed here has the potential to reconcile the ongoing debate about size distribution models in empirical data, the two most prominent of which are the Pareto and the lognormal distribution.

KW - Sustainability sciences, Management & Economics

KW - cattle farming

KW - environmental risk

KW - Gibrat's Law

KW - hypothesis testing

KW - model choice

KW - model selection

KW - Pareto distribution

KW - rank-size rule

KW - semiarid rangelands

KW - size distributions

UR - http://www.scopus.com/inward/record.url?scp=84928315992&partnerID=8YFLogxK

U2 - 10.1093/ajae/aau034

DO - 10.1093/ajae/aau034

M3 - Journal articles

VL - 97

SP - 978

EP - 997

JO - American Journal of Agricultural Economics

JF - American Journal of Agricultural Economics

SN - 0002-9092

IS - 3

ER -