Table A1: Base-line calibration of parameter values
47
|
Parameter |
Description |
Value |
Source |
|
r |
Discount rate |
0.33% |
4% annual discount rate |
|
ν |
Parameter of external scale economies |
0 |
Blanchard and Giavazzi (2003) |
|
σ |
Elasticity of substitution |
3.8 |
Bernard, Redding, Schott (2007) |
|
bi_______________ |
Unemployment benefits |
0.4 |
Standard |
|
m |
Efficiency of matching function |
0.636 |
Job finding rate=0.45; Shimer (2005) and Hall (2005) |
|
α |
Elasticity of the matching function |
0.5 |
Hosios (1990) |
|
β |
Bargaining power |
0.5 |
Hosios (1990) |
|
δ____________ |
Rate of firm exit |
0.91% |
Firm turnover rate=1.8%; Bartelsmann, Haltiwanger and Scarpetta (2004) |
|
Xi___________ |
Rate of match-specific separation |
2.5% |
Job separation rate=3.4% |
|
φ_______ |
Minimum value of productivity |
0.5 |
Arbitrary. |
|
γ_______________________________ |
Shape of Pareto Distribution |
3.4 |
Bernard, Redding, Schott (2007) |
|
c |
Cost of posting a vacancy |
1 |
To match θ = 0.5 (Hall, 2005) |
|
fe |
Fixed entry cost |
39.57 |
To match θ = 0.5 (Hall, 2005) |
|
f____ |
Fixed cost of production |
0.116 |
Average firm size = 21.8 |
|
fx_________ |
Fixed foreign market access costs |
0.193 |
Bernard, Eaton, Jensen and Kortum (2003) |
|
τ |
Iceberg trade costs |
1.3 |
Ghironi and Melitz (2005) |
|
L |
Size of population |
1 |
Size normalization |
|
P1 |
Numeraire |
% |
Normalization |
|
N |
Number of countries |
3 |
Allows for direct and indirect spill-overs |