IMF Working Papers

Entry Costs and the Macroeconomy

By Germán Gutiérrez, Callum Jones, Thomas Philippon

November 1, 2019

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Germán Gutiérrez, Callum Jones, and Thomas Philippon. Entry Costs and the Macroeconomy, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We combine a structural model with cross-sectional micro data to identify the causes and consequences of rising concentration in the US economy. Using asset prices and industry data, we estimate realized and anticipated shocks that drive entry and concentration. We validate our approach by showing that the model-implied entry shocks correlate with independently constructed measures of entry regulations and M&As. We conclude that entry costs have risen in the U.S. over the past 20 years and have depressed capital and consumption by about seven percent.

Subject: Competition, Consumption, Corporate sector, Economic sectors, Financial institutions, Financial markets, Financial services, National accounts, Stocks, Zero lower bound

Keywords: Adjustment cost, Capital adjustment cost, Competition, Concentration ratio, Consumption, Corporate Investment, Corporate sector, Cost shock, Entry cost shock, Entry rate, Europe, Exit rate, Fed funds rate, Firm entry, Monetary policy rule, Nominal interest rate, Price choice, Stocks, Time series, Tobin’s Q, WP, Zero Lower Bound

Publication Details

  • Pages:

    43

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2019/233

  • Stock No:

    WPIEA2019233

  • ISBN:

    9781513512945

  • ISSN:

    1018-5941