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

Julian di Giovanni, Andrei Levchenko and Romain Ranciere

No 598, Working Papers from Research Seminar in International Economics, University of Michigan

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)
Pages: 29 pages
Date: 2010-03
New Economics Papers: this item is included in nep-cdm
References: Add references at CitEc
Citations: View citations in EconPapers (17)

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http://www.fordschool.umich.edu/rsie/workingpapers/Papers576-600/r598.pdf

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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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:598

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