Economics at your fingertips  

Powerless: gains from trade when firm productivity is not Pareto distributed

Marco Bee and Stefano Schiavo

Review of World Economics (Weltwirtschaftliches Archiv), 2018, vol. 154, issue 1, 15-45

Abstract: Abstract Most trade models featuring heterogeneous firms assume a Pareto productivity distribution, on the basis that it provides a reasonable representation of the data and because of its analytical tractability. However, recent work shows that the characteristics of the productivity distribution crucially affect the estimated gains from trade. This paper thoroughly compares the gains from trade obtained under three different productivity distributions (Pareto, lognormal, and Weibull) and investigates their policy implications. We find that both the magnitude of the welfare gains and the relative importance of the fixed versus variable trade costs change significantly. Hence, relying blindly on a single distribution is dangerous when performing trade policy analysis.

Keywords: Lognormal; Pareto; Weibull; International trade; Welfare; Firm heterogeneity (search for similar items in EconPapers)
JEL-codes: C46 C52 D60 F12 F13 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Powerless: gains from trade when firm productivity is not Pareto distributed (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10290/PS2

Access Statistics for this article

Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

More articles in Review of World Economics (Weltwirtschaftliches Archiv) from Springer, Institut für Weltwirtschaft (Kiel Institute for the World Economy) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-04-15
Handle: RePEc:spr:weltar:v:154:y:2018:i:1:d:10.1007_s10290-017-0295-z