8 - Chaney_model_Chaney_slides

# Note pareto distributions are invariant to truncation

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Unformatted text preview: t to truncation, - P ( > ) P ( > | > ) = = - In country n, Ln potential entrants. Thomas Chaney (University of Chicago) ECON 357 5 / 17 Ownership structure Without free entry, ownership structure matters. Aggregate world profits () equally distributed across workers. Aggregate income in country i, )Li L (1 + Thomas Chaney (University of Chicago) ECON 357 6 / 17 Zero cutoff profit conditions Sales by firm from country i in country j, rij ( ) = ij ( - 1) Pj 1- ׵ 1+ L Lj Only firms with ij from i export to j, Entry threshold into j depends on prices in j. -11 1 - ij ij = 0 ij = 1 fij-1 Pj-1 Lj ij (ZCPi j) Thomas Chaney (University of Chicago) ECON 357 7 / 17 Aggregate prices Prices in j depends on which firms able to enter j, Pj1- = k =1 N N ^ Lk pkj ( )1- dG ( ) kj = k =1 N Lk kj ^ -1 kj -1 dG ( ) -1 = Lk - ( - 1) k =1 -1 1 kj kj-1- Thomas Chaney (University of Chicago) ECON 357 8 / 17 Aggregate prices Prices in j depends thresholds of entry into j. Threshold of entry into j depends on prices in j. Simple solution for prices, Pj = 2 with j- N k =1 Lj L 1 (Lj )- -...
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## This note was uploaded on 04/26/2013 for the course ECON 521 taught by Professor Danieldias during the Spring '13 term at University of Illinois, Urbana Champaign.

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