HAL will be down for maintenance from Friday, June 10 at 4pm through Monday, June 13 at 9am. More information
Skip to Main content Skip to Navigation
Preprints, Working Papers, ...

Firm Heterogeneity and Aggregate Welfare

Abstract : We examine how firm heterogeneity influences aggregate welfare through endogenous firm selection. We consider a homogeneous firm model that is a special case of a heterogeneous firm model with a degenerate productivity distribution. Keeping all structural parameters besides the productivity distribution the same, we show that the two models have di↵erent aggregate welfare implications, with larger welfare gains from reductions in trade costs in the heterogeneous firm model. Calibrating parameters to key U.S. aggregate and firm statistics, we find these differences in aggregate welfare to be quantitatively important (up to a few percentage points of GDP). Under the assumption of a Pareto productivity distribution, the two models can be calibrated to the same observed trade share, trade elasticity with respect to variable trade costs, and hence welfare gains from trade (as shown by Arkolakis, Costinot and Rodriguez-Clare, 2012); but this requires assuming different elasticities of substitution between varieties and different fixed and variable trade costs across the two models.
Document type :
Preprints, Working Papers, ...
Complete list of metadata

https://hal-sciencespo.archives-ouvertes.fr/hal-03473900
Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Friday, December 10, 2021 - 5:56:10 AM
Last modification on : Friday, March 25, 2022 - 3:30:41 AM

File

dp2013-11melitzredding.pdf
Publisher files allowed on an open archive

Identifiers

Collections

Citation

Marc Melitz, Stephen Redding. Firm Heterogeneity and Aggregate Welfare. 2013. ⟨hal-03473900⟩

Share

Metrics

Record views

2

Files downloads

0