Welfare and Trade without Pareto

Details

Serval ID
serval:BIB_1B9CD372062A
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Welfare and Trade without Pareto
Journal
American Economic Review
Author(s)
Head  K., Mayer  T., Thoenig  M.
ISSN
0002-8282
Publication state
Published
Issued date
05/2014
Peer-reviewed
Oui
Volume
104
Number
5
Pages
310-316
Language
english
Abstract
Quantifications of gains from trade in heterogeneous firm models assume that productivity is Pareto distributed. Replacing this assumption with log-normal heterogeneity retains some useful Pareto features, while providing a substantially better fit to sales distributions-especially in the left tail. The cost of log-normal is that gains from trade depend on the method of calibrating the fixed cost and productivity distribution parameters. When set to match the size distribution of firm sales in a given market, the log-normal assumption delivers gains from trade in a symmetric two-country model that can be twice as large as under the Pareto assumption.
Web of science
Create date
25/10/2013 22:02
Last modification date
21/08/2019 6:12
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