Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192334 
Authors: 
Year of Publication: 
2003
Series/Report no.: 
Discussion Papers No. 352
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
The paper analyses how a tractable representation of productivity heterogeneity among firms modifies the standard Dixit-Stiglitz (DS) model of monopolistic competition. The properties of the asymmetric model are explored by comparative statics analysis. The equilibrium adjustments of industry aggregates, such as the number of firms, output and the productivity of variable inputs are compared with the corresponding adjustments in the symmetric model. The analysis thereby clarifies when and why the standard DS model may provide a misleading picture of the aggregate industry behaviour. A by-product of the paper is to demonstrate that a more realistic description of a basic aspect of technology heterogeneity can be taken into account at a relatively low cost in terms of reduced tractability.
Subjects: 
Monopolistic competition
productivity heterogeneity
aggregation
JEL: 
L11
L13
L16
Document Type: 
Working Paper

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