Firm entry under financial frictions

Miguel Casares and Jean-Christophe Poutineau ()

Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: Introducing both endogenous firm entry and a requirement for external finance in a general-equilibrium model leads to three main results. First, the financial constraint has contractionary effects on both equity investment and the labor supply as they are inversely related to the marginal finance cost. Second, net firm creation amplifies the steady-state impact of changes in either productivity or banking efficiency due to procyclical firm entry. Third, a higher elasticity of substitution (that implies a lower mark-up) cuts the number of firms and makes aggregate output fall in steady state, opposite to standard models with constant number of firms.

Keywords: firm creation; financial frictions; steady-state analysis. (search for similar items in EconPapers)
JEL-codes: E13 E44 (search for similar items in EconPapers)
Pages: pages
Date: 2011
New Economics Papers: this item is included in nep-dge and nep-mac
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Related works:
Journal Article: Firm Entry under Financial Frictions (2013)
Working Paper: Firm entry under financial frictions (2013)
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