README file for the article "Policy Distortions and Aggregate Productivity with Heterogeneous Establishments," by Diego Restuccia and Richard Rogerson, RED 2008.

The are three programs required to generate statistics from the model in MATLAB format:
(1) RR_model_RED.m (main program)
(2) Wefcn.m 
(3) subfcn.m

Programs in (2) and (3) are auxiliary used in the main program.

Program (1) produces the results for the benchmark economy, including the calibration as well as the results for the distorted economies. These results are summarized by a print out and a latex file RR_tables.tex. This program calls data from file establishment_dist.txt which contains data on employment size and share of establishments. The data is used to calibrate the distribution of establishments across producivitity levels. The data file is also supplied.

Program (1) needs to be run several times to accomodate different assumptions on distortionary policies, for instance whether the taxes/subsidies are on output, capital or labor; whether distortions are correlated or uncorrelated; different fractions of establishments taxed and subsidized; among others. These choices are clearly specified within the programs.