The Political Economy of Entry Barriers
Latchezar Popov and
Toshihiko Mukoyama ()
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Latchezar Popov: The University of Virginia
No 1288, 2013 Meeting Papers from Society for Economic Dynamics
We study a political economy model of entry barriers. Each period the policymaker determines whether to impose a high barrier on entry, and the special interest groups try to influence the policymaker's decision. Entry is accompanied by creative destructionâ€” 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 which environment supports a policy that blocks entry. In the dynamic version of the model, the economy can exhibit various different dynamics, such as multiple steady states and policy-induced cycles.
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Journal Article: The Political Economy of Entry Barriers (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:1288
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