Innovation, firm size distribution, and gains from trade

• 成果类型: Article
• 署名作者: Chen, Yi-Fan; Hsu, Wen-Tai; Peng, Shin-Kun
• 署名单位: National University Kaohsiung; Academia Sinica - Taiwan
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1933-6837
• DOI: 10.3982/TE4152
• 发表日期: 2023-01-01
• 页码: 341-380
• 关键词: Power law; firm heterogeneity; asymptotic power functions; Regular Variation; INNOVATION; gains from trade; F12; F13; F41

摘要

Power laws in productivity and firm size are well documented empirical regularities. As they are upper right-tail phenomena, this paper shows that assuming asymptotic power functions for various model primitives (such as demand and firm heterogeneity) are sufficient for matching these regularities. This greatly relaxes the functional-form restrictions in economic modeling and can be beneficial in certain contexts. We demonstrate this in a modified Melitz (2003) model, which embeds an innovation mechanism so as to endogenize the productivity distribution and generate both of the above-mentioned power laws. We also investigate the model's welfare implications with regard to innovation by conducting a quantitative analysis of the welfare gains from trade.