Do Economic Variables Follow Scale or Location-Scale Distributions?

Posted: 8 Mar 2010

Date Written: January 2010


Economics researchers often assume that random variables are drawn from distributions that are members of scale or location-scale families of distributions. This article generalizes earlier results in the literature on the bias in least squares estimates of multiplicative error models, and uses those results to construct a test of the scale and location-scale hypotheses. A Monte Carlo simulation shows that the test is powerful in large samples. The empirical relevance of these findings is illustrated with estimates of a supply function for U.S. wheat production. Implications for applied economics research are discussed.

Keywords: bias test, location-scale, multiplicative error, scale, wheat production, C12, C51

Suggested Citation

Antle, John M., Do Economic Variables Follow Scale or Location-Scale Distributions? (January 2010). American Journal of Agricultural Economics, Vol. 92, Issue 1, pp. 196-204, 2010, Available at SSRN: or

John M. Antle (Contact Author)

Oregon State University

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