The Interaction of Entry Barriers and Financial Frictions in Growth

Timothy Kehoe, Sewon Hur, Kim Ruhl and Jose Asturias

No 792, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the interaction between financial frictions and firm entry barriers on growth. We construct a model in which aggregate growth is driven by the continual entry of new firms that face barriers to entry and financial frictions. We find that reforms to financial frictions and entry barriers are substitutes -- once a country has enacted one type of reform, the percentage increase in GDP from the other reform decreases. We also show that economies with more severe financial frictions and entry costs have lower levels of output along the balanced growth path, even though all economies grow at the same constant rate. The model generates sharp predictions regarding entry barriers, financial frictions, and output levels, which are borne out in the cross country data.

Date: 2015
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2015/paper_792.pdf (application/pdf)

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:sed015:792

Access Statistics for this paper

More papers in 2015 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 ().