Power Laws in Firm Size and Openness to Trade: Measurement and Implications

Rancière, Romain, Andrei Levchenko and Julian di Giovanni
Authors registered in the RePEc Author Service: Romain Rancière

No 7773, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting firms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior.

Keywords: Firm size distribution; International trade; Power laws (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Date: 2010-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Power laws in firm size and openness to trade: Measurement and implications (2011)
Working Paper: Power laws in firm size and openness to trade: Measurement and implications (2011)
Working Paper: Power laws in firm size and openness to trade: Measurement and implications (2011)
Working Paper: Power Laws in Firm Size and Openness to Trade: Measurement and Implications (2010)
Working Paper: Power Laws in Firm Size and Openness to Trade: Measurement and Implications (2010)
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