Technology, Demand, and the Size Distribution of Firms∗
نویسندگان
چکیده
We present exact conditions relating the distribution of firm productivity to the distributions of sales, output, and markups; and we use the Kullback-Leibler divergence to quantify the information loss when a predicted distribution fails to match the actual one. In particular, we show that, for a large family of distributions (including Pareto, lognormal, and Fréchet), the distributions of productivity and output are the same if and only if demand is “CREMR” (Constant Revenue Elasticity of Marginal Revenue). And we show empirically that the choice between Pareto and log-normal distributions is less important than the choice between CREMR/CES and other demands.
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