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The Political Economy of Entry Barriers

Toshihiko Mukoyama () and Latchezar Popov

Review of Economic Dynamics, 2014, vol. 17, issue 3, 383-416

Abstract: We study a political economy model of entry barriers. Each period the policymaker determines whether to impose a high barrier to entry, and the special interest groups try to influence the policymaker's decision. Entry is accompanied by creative destruction - when many new firms enter, old firms are more likely to be driven out of the market. Therefore the current incumbents (industry leaders) tend to lobby for a higher entry barrier and potential entrants (industry followers) are likely to lobby for a freer environment for entry. We analyze both static and dynamic versions of the model to examine what kind of environment supports a policy that blocks entry. In the dynamic model, the economy can exhibit various different dynamics. In particular, multiple steady states may arise in equilibrium. (Copyright: Elsevier)

Keywords: Political economy; Lobbying; Entry and exit (search for similar items in EconPapers)
JEL-codes: D72 E60 L51 O25 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.red.2013.11.002

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