Welfare and Trade Without Pareto

Thierry Mayer and Keith Head
Authors registered in the RePEc Author Service: Mathias Thoenig

No 9826, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Pareto; Trade; Welfare (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (142)

Downloads: (external link)
https://cepr.org/publications/DP9826 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Welfare and Trade without Pareto (2014)
Working Paper: Welfare and Trade without Pareto (2014)
Working Paper: Welfare and Trade Without Pareto (2014)
Working Paper: Welfare and Trade without Pareto (2014)
Working Paper: Welfare and Trade Without Pareto (2014)
Working Paper: Welfare and Trade Without Pareto (2014)
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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:9826

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP9826

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().