When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms

Churen Sun, Guoqiang Tian and Tao Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: This paper realizes the Melitz-Pareto model using firm-level data from 40 Chinese manufacturing industries from 1998 and 2007. Under the hypothesis that the productivity of firms in each industry follows a Pareto distribution, we show that the domestic sales of non-exporters and the foreign sales of exporters in each industry also follow a Pareto distribution, respectively. We then estimate industrial productivity Pareto distributions, and cut-offs of domestic sales of non-exporters and foreign sales of exporters for each industry. Together this yields all the parameters of the Melitz-Pareto model. Our result shows that the Melitz-Pareto model may not fully apply to Chinese firms.

Keywords: Melitz-Pareto model; Pareto distribution; productivity heterogeneity; export (search for similar items in EconPapers)
JEL-codes: D23 F12 (search for similar items in EconPapers)
Date: 2011-10-31
New Economics Papers: this item is included in nep-bec, nep-eff and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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