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Firm Size Distribution and Variable Elasticity of Demand

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  • Yuichiro Matsumoto

    (Osaka University)

Abstract

Prior studies suggest that a Pareto distribution of the firm fs productivity distribution is difficult to replicate the observed log standard deviation of firm sales. These studies are based on constant elasticity preferences, which entail too low log sales deviation. The present study shows that, in contrast to constant elasticity cases, the log standard deviation is too high in variable elasticity cases. To match the observed sales dispersion, one must set a Pareto tail parameter relatively higher values.

Suggested Citation

  • Yuichiro Matsumoto, 2019. "Firm Size Distribution and Variable Elasticity of Demand," Discussion Papers in Economics and Business 19-02, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1902
    as

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1902.pdf
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    References listed on IDEAS

    as
    1. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    2. Feenstra, Robert C., 2003. "A homothetic utility function for monopolistic competition models, without constant price elasticity," Economics Letters, Elsevier, vol. 78(1), pages 79-86, January.
    3. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151-1199.
    4. Fally, Thibault, 2019. "Generalized separability and the gains from trade," Economics Letters, Elsevier, vol. 178(C), pages 8-12.
    5. Kang, Kichun, 2017. "Identifying the dispersion of the Pareto productivity distribution in international trade," Economics Letters, Elsevier, vol. 161(C), pages 108-111.
    6. repec:hal:spmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg is not listed on IDEAS
    7. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Firm Size Distribution; Pareto Distribution; Variable Elasticity of Substitution;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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