Citation

Discussion Paper Details

Please find the details for DP12044 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Sales and Markup Dispersion: Theory and Empirics

Author(s): Monika Mrázová, J Peter Neary and Mathieu Parenti

Publication Date: May 2017

Keyword(s): CREMR Demands, Gibrat's Law, Heterogeneous Firms, Kullback-Leibler Divergence, Lognormal versus Pareto Distributions and Sales and Markup Distributions

Programme Area(s): International Trade and Regional Economics

Abstract: We derive exact conditions relating the distributions of firm productivity, sales, output, and markups to the form of demand in monopolistic competition. Applications include a new "CREMR" demand function (Constant Revenue Elasticity of Marginal Revenue): it is necessary and sufficient for the distributions of productivity and sales to have the same form (whether Pareto, lognormal, or Fréchet) in the cross section, and for Gibrat's Law to hold over time; it implies a new class of distributions well-suited to capture the dispersion of markups; and it provides a parsimonious fit for the distributions of sales and markups superior to most widely-used alternatives.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12044

Bibliographic Reference

Mrázová, M, Neary, J and Parenti, M. 2017. 'Sales and Markup Dispersion: Theory and Empirics'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12044