Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130426
Authors: 
Nigai, Sergey K.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5808
Abstract: 
I use firm-level data to show that neither the Log-normal nor the Pareto distribution can approximate the shape of the productivity distribution along the entire support. While the former underpredicts the thickness of the right tail, the latter does not capture the shape of the left one. Using empirical distribution as a benchmark, I show that such inaccuracies lead to sizable errors in the estimates of the gains from trade in models featuring firm selection. I propose using a mixed distribution which models the left tail as Log-normal and right tail as Pareto and produces negligible errors in quantitative analysis.
Subjects: 
productivity distribution
welfare gains
international trade
Pareto tail
JEL: 
F10
F12
Document Type: 
Working Paper

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