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

Marco Bee and Stefano Schiavo

No 2015-19, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: Most trade models featuring heterogeneous rms 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 productiv- ity distribution crucially affect the estimated gains from trade. This paper thoroughly compares the gains from trade obtained under dif- ferent productivity distributions: we find that both the magnitude of the welfare gains and the relative importance of the fixed versus variable trade costs change significantly. Relying blindly on a single distribution is therefore dangerous when performing welfare analysis.

Keywords: Iognormal; Pareto; Weibull; international trade; welfare; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: F12 (search for similar items in EconPapers)
Date: 2015-09
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Powerless: gains from trade when firm productivity is not Pareto distributed (2018)
Working Paper: Powerless: gains from trade when firm productivity is not Pareto distributed (2015)
Working Paper: Powerless: gains from trade when firm productivity is not Pareto distributed (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1519

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