Sales and markup dispersion: theory and empirics
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 Frechet), the distributions of productivity and output are the same if and only if demand is \CREMR"...
| Main Authors: | , , |
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| Format: | Working paper |
| Language: | English |
| Published: |
Centre for Economic Policy Research
2017
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| Summary: | 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 Frechet), the distributions of productivity and output are the same if and only if demand is \CREMR" (Constant Revenue Elasticity of Marginal Revenue). We then 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 sales and markups, the choice between Pareto and log-normal productivity distributions matters less than the choice between CREMR and other demands. |
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