Technology, Demand, And The Size Distribution Of Firms

J. Peter Neary and Mathieu Parenti ()

No 774, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Abstract We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand; in particular, for a large family (including Pareto, log-normal, and Fréchet), the distributions of productivity and output are the same if and only if demand is "CREMR" (Constant Revenue Elasticity of Marginal Revenue). Moreover, we use the Kullback-Leibler Divergence to quantify the information loss when a predicted distribution fails to match the actual one; and we find that,to explain the sales distribution, the choice between Pareto and log-normal productivity distributions matters less than the choice between CREMR and other demands.

Keywords: CREMR Demands; Heterogeneous Firms; Kullback-Leibler Divergence; Log-Normal Distribution; Pareto Distribution. (search for similar items in EconPapers)
JEL-codes: F12 F15 F23 (search for similar items in EconPapers)
Date: 2015-12-21
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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