Entry Costs Rise with Development

Pete Klenow, Huiyu Li and Albert Bollard

No 471, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: A potential benefit of a large market (GDP) is a large number of locally-produced varieties. We attempt to quantify the number of varieties produced in a market by counting the number of firms and plants. Looking at manufacturing industries across countries and over time, we find that variety increases strongly with the number of workers and modestly with output per worker. In many models of firm dynamics, trade and growth, these facts imply that the cost of creating a new variety increase sharply with productivity. This increase in entry costs can be due to rising labor costs with development as well as intrinsically higher costs of using more sophisticated technologies. As a result, the welfare impact of productivity- enhancing policies appears to be only modestly amplified through variety expansion.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (7)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:471

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann (chuichuiche@gmail.com).