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Exact Draws from the Stationary Distribution of Entry-Exit Models

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  • Takashi Kamihigashi
  • John Stachurski

Abstract

In equilibrium models of firm dynamics, the stationary equilibrium distribution of firms summarizes the predictions of the model for a given set of primitives. Focusing on Hopenhayn's seminal model of firm dynamics with entry and exit (Econometrica, 60:5, 1992, p.~1127--1150), we provide an algorithm that generates exact draws from the stationary distribution in finite time for any specified exit threshold. The technique is able to rapidly generate large numbers of exact and independent draws.

Suggested Citation

  • Takashi Kamihigashi & John Stachurski, 2012. "Exact Draws from the Stationary Distribution of Entry-Exit Models," ANU Working Papers in Economics and Econometrics 2012-588, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2012-588
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp588.pdf
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    References listed on IDEAS

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    1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    2. Nishimura, Kazuo & Stachurski, John, 2010. "Perfect simulation of stationary equilibria," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 577-584, April.
    3. Gian Luca Clementi & Berardino Palazzo, 2016. "Entry, Exit, Firm Dynamics, and Aggregate Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(3), pages 1-41, July.
    4. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
    5. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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