The EMG Distribution and Aggregate Trade Elasticities

Olga Timoshenko and Erick Sager ()
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Erick Sager: U.S. Bureau of Labor Statistics

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: When firm-level productivity is not assumed to be Pareto distributed, new trade models predict that micro-data such as sales distributions determine the aggregate trade elasticity. In this paper, we document novel features of export sales distributions across destination markets. Notably there is large variation in dispersion and degrees of asymmetry. To capture these features of the export sales data we introduce a novel distribution: the Exponentially Modified Gaussian (EMG) distribution. We show that the EMG distribution fits sales data far better than either of the often assumed log- Normal or Pareto distributions and we provide quantitative evidence that these less accurate distributions can generate highly biased trade elasticities.

Pages: 43 pages
Date: 2016
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2016-15

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