Colin J. Hottman
International Finance Division
20th Street and Constitution Ave N.W.
Washington, D.C. 20551
Institutional Affiliation: Federal Reserve Board
Information about this author at RePEc
NBER Working Papers and Publications
|August 2014||Quantifying the Sources of Firm Heterogeneity|
with , : w20436
We develop and structurally estimate a model of heterogeneous multiproduct firms that can be used to decompose the firm-size distribution into the contributions of costs, “appeal” (quality or taste), markups, and product scope. Using Nielsen bar-code data on prices and sales, we find that variation in firm appeal and product scope explains at least four fifths of the variation in firm sales. We show that the imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are highly dependent on implicit demand system assumptions and probably dramatically understate the relative productivity of the largest firms. Although most firms are well approximated by the monopolistic competition b...
Published: Colin J. Hottman & Stephen J. Redding & David E. Weinstein, 2016. "Quantifying the Sources of Firm Heterogeneity," The Quarterly Journal of Economics, Oxford University Press, vol. 131(3), pages 1291-1364. citation courtesy of