Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198793 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7433
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand in monopolistic competition. Applications include a new “CREMR” demand function (Constant Revenue Elasticity of Marginal Revenue): it is necessary and sufficient for the distributions of productivity and sales to have the same form (whether Pareto, lognormal, or Fréchet) in the cross section, and for Gibrat’s Law to hold over time; it implies a new class of distributions well-suited to capture the dispersion of markups; and it provides a parsimonious fit for the distributions of sales and markups superior to most widely-used alternatives.
Subjects: 
CREMR demands
Gibrat’s Law
heterogeneous firms
Kullback-Leibler divergence
lognormal versus Pareto distributions
sales and markup distributions
JEL: 
F15
F23
F12
Document Type: 
Working Paper
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