Entry costs and the macroenconomy

Thomas Philippon

No 13548, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We propose a model to identify the causes of rising profits and concentration, and declining entry and investment in the US economy. Our approach combines a rich structural DSGE model with cross sectional identification from firm and industry date. Using asset prices, our model estimates the realized and anticipated shocks that drive the endogeneity of entry and concentration and recovers shocks to entry costs. We validate our approach by showing that the model implied entry shocks correlate with independently constructed measures of entry regulation and M&A activities. We conclude that entry costs have risen and that the ensuing decline in competition has depressed consumption by five to ten percent.

Keywords: Corporate investment; Competition; Tobin's q; Zero lower bound (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-dge
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