Author: Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Efficiency in Large Markets with Firm Heterogeneity
Author: Firm Heterogeneity and Multiproduct Firms in International Trade
Author: Hong MaWhat is Firm Heterogeneity in Trade Models?
Author: Colin HottmanPublisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 0
Book Description
We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms.
Firm Heterogeneity in Macroeconomics
Author: Allen TranPublisher:
ISBN:
Category :
Languages : en
Pages : 141
Book Description
Macroeconomic models are often estimated with aggregate data, aligning the aggregated behavior of firms and households in models to the data. However, using aggregate data alone can overlook important details of firm behavior that are crucial for understanding issues in macroeconomics. In this dissertation, I use data on firms at the micro-level to more accurately capture firms behavior and their interactions with one another. This approach is applied to answer questions that relate to the monetary policy transmission mechanism, economic growth from new entrants and welfare gains from new technology. A substantial literature exists which suggests that imperfect information across firms is capable of generating large monetary non-neutralities. In Chapter One, the level of imperfect information is taken from micro-data and used to discipline a standard menu cost model augmented with information frictions. In the model, imperfect information has a negligible effect and real responses to a monetary shock are small and transient in contrast to the bulk of the imperfect information literature. The selection effect dominates the effects of imperfect information as the level of dispersion in inflation expectations in the data is tiny. This result still holds even when the level of dispersion is set to that of the maximal observed levels of dispersion. Chapter Two presents data that suggests new entering establishments compete for customers, rather than inputs in order to grow. Consistent with the data, I present a model where customers satisfice in forming relationships with establishments in the presence of search frictions. The extent of these search frictions is a new margin that affects selection and allocative efficiency. As search becomes less random and more directed, customers are less willing to satisfice, improving allocative efficiency and inducing exit of slower growing firms. When search frictions in product markets are increased to match establishment dynamics in Chile, output falls by roughly 14 per cent relative to the model calibrated to the US, reflecting decreased allocative efficiency. Chapter Three studies the impact of online retail on aggregate welfare. I develop a new measure of store level retail productivity and with a spatial model, calculate each store's equilibrium response to increased competitive pressure from online retailers. From counterfactual exercises mimicking improvements in shipping and increased internet access, I estimate that improvements in online retail increased aggregate welfare from retail activities by 13.4 per cent. Roughly two-thirds of the increase can be attributed to welfare improvements holding fixed market shares, with the remainder due to reallocation. Surprisingly, 8.2 percent of firms actually benefit as they absorb market share from closed stores. Finally, I estimate that the proposed Marketplace Fairness Act would claw back roughly one-third of sales that would otherwise have gone to online retailers between 2007-12.
Essays on firm heterogeneity and quality in international trade
Author: Eddy BekkersPublisher: Rozenberg Publishers
ISBN: 905170903X
Category :
Languages : en
Pages : 144
Book Description
The thesis is organized as follows. Chapter 2 contains a survey of the three most in‡fluential models on fi…rm heterogeneity and of the most important empirical work on firrm heterogeneity. The chapter starts with a brief review of the homogeneous productivity imperfect competition literature. Chapter 2 …finishes with a comparison of the three most in‡fluential models of fi…rm heterogeneity and the oligopoly model put forward in the thesis. Chapter 3 addresses exporting uncertainty under heterogeneous popularity. Chapter 4 contains the chapter on …firm heterogeneity under oligopoly. Chapter 5 constitutes the models on …firm heterogeneity and endogenous quality. Chapter 6 points out the within-sector specialization model. Chapter 7 addresses the effect of importer characteristics on unit values and the role of markups and quality to explain this effect. Chapter 8 concludes.
Selection and Sorting of Heterogeneous Firms Through Competitive Pressures
Author: Kiminori MatsuyamaPublisher:
ISBN:
Category : Exchange rate pass-through
Languages : en
Pages : 71
Book Description
To understand theoretically how competitive pressures affect selection and sorting of firms with different productivity, we study the Melitz (2003) model under the H.S.A. (Homothetic with a Single Aggregator) class of demand systems. H.S.A. is tractable due to its homotheticity and to its single aggregator that serves as a sufficient statistic for competitive pressures, which acts as a magnifier of firm heterogeneity. It is also flexible enough to allow for the choke price, the 2nd law of demand -- "a higher price leads to a higher price elasticity" -- and the 3rd law of demand -- "a higher price leads to a smaller rate of change in the price elasticity." We show, among others: i) More productive firms have higher profits and revenues; they have higher markup rates under the 2nd law and lower pass-through rates under the 3rd law. Employments are not monotone in firm productivity; they are hump-shaped under the 2nd and 3rd laws. The 2nd law also implies the procompetitive effect and strategic complementarity in pricing. ii) A lower entry cost leads to more competitive pressures, which reduces the markup rates of all firms under the 2nd law and raises the pass-through rates of all firms under the 3rd law. The profits of all firms decline (at faster rates among less productive firms under the 2nd law), which leads to a tougher selection. The revenues of all firms also decline (at faster rates among less productive firms under the 3rd law). A lower overhead cost has similar effects when the employment is decreasing in firm productivity, which occurs under the 2nd and the 3rd laws for a sufficiently high overhead cost. iii) Larger market size also leads to more competitive pressures, reducing the markup rates of all firms under the 2nd law and raises the pass-through rates of all firms under the 3rd law. The profits among more productive firms increase, while those among less productive decline under the 2nd law, which leads to a tougher selection. The revenues among more productive firms also increase, while those among less productive decline under the 3rd law at least when the overhead cost is not too large. iv) The impacts on the masses of entrants and of active firms depend, often crucially, on whether the elasticity of the distribution of the marginal cost is increasing or decreasing with Pareto-distributed productivity being the knife-edge case. v) Both a lower entry cost and larger market size may cause an increase in the average markup rate under the 2nd law and a decline in the average pass-through under the 3rd law due to the composition effect, since they also lead to a tougher selection, forcing less productive firms with lower markup rates and higher pass-through rates to shrink and to exit. This suggests that a rise of the markup may occur due to increased competitive pressures, causing a shift from the less productive/smaller to the more productive/larger. vi) In a multi-market setting, competitive pressures are stronger in larger markets. And more productive firms sort themselves into larger markets under the 2nd law. Due to this composition effect, the average markup (pass-through) rates can be higher (lower under the 3rd Law) in larger (thus more competitive) markets. This result suggests a caution when interpreting the evidence that compares the average markup and pass-through rates across markets with different sizes.
On the Measurement of Efficiency and Productivity Under Firm Heterogeneity
Author: Magnus KellermannComparative Advantage and Heterogeneous Firms
Author: Andrew B. BernardPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper examines how country, industry and firm characteristics interact in general equilibrium to determine nations' responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The relative ascendance of high-productivity firms within industries boosts aggregate productivity and drives down consumer prices. In contrast with the neoclassical model, these price declines dampen and can even reverse the real wage losses of scarce factors as countries liberalize.
Firm Heterogeneity, Endogenous Entry, and the Business Cycle
Author: Gianmarco I. P. OttavianoPublisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 28
Book Description
This paper investigates the role that the entry and exit of heterogeneous firms plays in shaping aggregate fluctuations in economic activity. In so doing, it develops a dynamic stochastic general equilibrium model in which procyclical entry and countercyclical exit along a real business cycle lead to endogenous cyclical movements in average firm productivity. These movements stem from a composition effect due to the reallocation of market shares among firms with different levels of efficiency and affect the propagation of exogenous technological shocks. Numerical analysis suggests that existing models with representative firms may overstate the actual role of procyclical entry and exit in imperfectly competitive markets as a propagation mechanism of exogenous technology shocks. The reason is that procyclical entry and countercyclical exit disproportionately involve less efficiency firms whose impact on aggregate economic activity is hampered by their smaller size -- National Bureau of Economic Research web site.
Product Differentiation and Industrial Structure
Author: Avner ShakedPublisher:
ISBN:
Category : Diversification in industry
Languages : en
Pages : 52
Book Description