ENTRY DYNAMICS, DEMAND SHOCKS AND INDUCED PRODUCTIVITY FLUCTUATIONS (original) (raw)

Entry of firms and cost of disinflation in New Keynesian models

Economics Letters, 2013

h i g h l i g h t s • A New Keynesian model with Calvo price setting and non zero steady state inflation. • Introducing real imperfection in the form of costs of entry in the product market. • A disinflation experiment generates output losses in the short run.

On the Ramsey equilibrium with heterogeneous consumers and endogenous labor supply

2010

In this paper, we address the stability issue, stressing the role of labor supply, in a Ramsey model with heterogeneous households subject to borrowing constraints. Making labor supply endogenous leads us to prove the existence of two kinds of steady state: the one where everybody supplies labor, the other where only the most patient agent refrains from working. Focusing on the latter and going beyond models with inelastic labor supply, we show how preferences of impatient agents affect the saddle-path stability and the occurrence of endogenous cycles. When their elasticity of intertemporal substitution in consumption exceeds one, instability and cycles are less likely, requiring lower degrees of capital-labor substitution. Conversely, elasticity values below one promote the emergence of fluctuations.

An estimated small open economy model with frictional unemployment

2011

This paper investigates labor market dynamics in New Zealand by estimating a structural small open economy model enriched with search and matching frictions in the labor market. We show that the model fits reasonably well the business cycle features of key macroeconomic variables. We then extend our analysis to understand the driving forces behind labor market variables. Our findings suggest that the bulk of variation in labor market variables is solely explained by disturbances pertaining to the labor market.

Entry costs and the dynamics of business formation

Journal of Macroeconomics, 2015

This paper studies the implications of entry costs for business formation in a dynamic stochastic general equilibrium model with endogenous entry and exit. The paper first documents some facts about business formation in the US. Exit is more volatile than entry, both are more volatile than output and co-move over the cycle. Firms are less volatile than output and pro-cyclical. Then, it shows that a model with entry and exit can replicate these facts fairly well. In addition it captures important features of the US business cycle, outperforming models with a fixed exit rate and a fixed number of firms. The performance of the model is sensitive to changes in the composition of entry costs.

Complementarity, Linkages between Firms, and the Effect of Entry Costs on Productivity

Review of Development Economics, 2017

In a general equilibrium model where firms are heterogeneous in terms of productivity, we introduce differentiated goods in production that are not perfect substitutes, as well as intermediate inputs needed to produce those goods. We show that an increase in either the complementarity of differentiated goods or the share of intermediate inputs in gross output, significantly increases the negative effect of entry costs on total factor productivity (TFP) and output per worker. We also find that the effect of complementarity is quantitatively stronger. If we assume an empirically plausible value for the elasticity of substitution between differentiated goods, then the model considerably improves its ability to reproduce the observed negative relationship between entry costs and TFP or output per worker. *The authors gratefully acknowledge financial support from Xunta de Galicia research program GPC2013-045 partly funded the European Regional Development Fund (ERDF), as well as from the Spanish Ministry of Economy and Competitiveness research program ECO2013-48884-C3-1-P.