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Sales and Markup Dispersion: Theory and Empirics

Monika Mrázová, J. Peter Neary () and Mathieu Parenti

No 7433, CESifo Working Paper Series from CESifo Group Munich

Abstract: We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand in monopolistic competition. Applications include a new “CREMR” demand function (Constant Revenue Elasticity of Marginal Revenue): it is necessary and sufficient for the distributions of productivity and sales to have the same form (whether Pareto, lognormal, or Fréchet) in the cross section, and for Gibrat’s Law to hold over time; it implies a new class of distributions well-suited to capture the dispersion of markups; and it provides a parsimonious fit for the distributions of sales and markups superior to most widely-used alternatives.

Keywords: CREMR demands; Gibrat’s Law; heterogeneous firms; Kullback-Leibler divergence; lognormal versus Pareto distributions; sales and markup distributions (search for similar items in EconPapers)
JEL-codes: F15 F23 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-hme
Date: 2018
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Working Paper: Sales and Markup Dispersion: Theory and Empirics (2017) Downloads
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