Exact Sampling from the Stationary Distribution of Entry-Exit Models

Takashi Kamihigashi and John Stachurski
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John Stachurski: Research School of Economics, Australian National University, Australia

No DP2013-03, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: In equilibrium models of firm dynamics, the stationary equilibrium distribution of firms summarizes the predictions of the model for a given set of primitives. Focusing on Hopenhayn's seminal model of firm dynamics with entry and exit (Econometrica, 60:5, 1992, p. 1127–1150), we provide an algorithm that samples exactly from the stationary distribution for any specified exit threshold. The algorithm is able to rapidly generate large numbers of exact and independent draws from this distribution, and can therefore be used to obtain unbiased estimates and confidence intervals for moments and distributions of interest.

Keywords: Simulation; Stationary equilibrium; Firm dynamics (search for similar items in EconPapers)
JEL-codes: C61 C63 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013-01
New Economics Papers: this item is included in nep-bec and nep-ore
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