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The EMG Distribution and Aggregate Trade Elasticities

Author

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  • Olga A. Timoshenko

    (George Washington University)

  • Erick Sager

    (U.S. Bureau of Labor Statistics)

Abstract

When firm-level productivity is not assumed to be Pareto distributed, new trade models predict that micro-data such as sales distributions determine the aggregate trade elasticity. In this paper, we document novel features of export sales distributions across destination markets. Notably there is large variation in dispersion and degrees of asymmetry. To capture these features of the export sales data we introduce a novel distribution: the Exponentially Modified Gaussian (EMG) distribution. We show that the EMG distribution fits sales data far better than either of the often assumed log- Normal or Pareto distributions and we provide quantitative evidence that these less accurate distributions can generate highly biased trade elasticities.

Suggested Citation

  • Olga A. Timoshenko & Erick Sager, 2016. "The EMG Distribution and Aggregate Trade Elasticities," Working Papers 2016-15, The George Washington University, Institute for International Economic Policy.
    • Handle: RePEc:gwi:wpaper:2016-15
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    References listed on IDEAS

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    Cited by:

    1. Olga A. Timoshenko & Erick Sager, 2017. "Uncertainty and Trade Elasticities," Working Papers 2017-8, The George Washington University, Institute for International Economic Policy.
    2. Illenin O. Kondo & Logan T. Lewis & Andrea Stella, 2018. "On the U.S. Firm and Establishment Size Distributions," Finance and Economics Discussion Series 2018-075, Board of Governors of the Federal Reserve System (U.S.).

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