Welfare and Trade Without Pareto
AbstractThis paper investigates the consequences of replacing the assumption of Pareto heterogeneity with log-normal heterogeneity. This case is interesting because it (a) maintains some desirable analytic features of Pareto, (b) ts the complete distribution of rm sales rather than just approximating the right tail, and (c) can be generated under equally plausible processes (see online appendix). The log-normal is reasonably tractable but its use sacrices some \scale-free" properties conveyed by the Pareto distribution. Aspects of the the calibration that do not matter under Pareto lead to important dierences in the gains from trade under log-normal.
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Bibliographic InfoPaper provided by Sciences Po in its series Sciences Po publications with number 2014-02.
Date of creation: Feb 2014
Date of revision:
Other versions of this item:
- Keith Head & Thierry Mayer & Mathias Thoenig, 2014. "Welfare and Trade Without Pareto," Sciences Po Economics Discussion Papers 2014-02, Sciences Po Departement of Economics.
- Head, Keith & Mayer, Thierry & Thoenig, Mathias, 2014. "Welfare and Trade Without Pareto," CEPR Discussion Papers 9826, C.E.P.R. Discussion Papers.
- C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D60 - Microeconomics - - Welfare Economics - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-11 (All new papers)
- NEP-GER-2014-04-11 (German Papers)
- NEP-INT-2014-04-11 (International Trade)
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