Title

Exact Draws from the Stationary Distribution of Entry-Exit Models

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.

Keywords

Simulation, stationary equilibrium, firm dynamics

JEL Classification

C61, C63

Inquiries

Takashi KAMIHIGASHI
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

John STACHURSKI
Research School of Economics, Australian National University