Power Laws in Firm Size and Openness to Trade: Measurement and Implications
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting rms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior.
Series:
Working Paper No. 2010/109
Subject:
Agroindustries Economic sectors Exports International trade
Frequency:
Monthly
English
Publication Date:
April 1, 2010
ISBN/ISSN:
9781455200689/1018-5941
Stock No:
WPIEA2010109
Pages:
31
Please address any questions about this title to publications@imf.org