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Entry, Exit and Business Cycles in a General Equilibrium Model

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  • Roberto M. Samaniego

    (George Washington University)

Abstract

This paper studies the role of entry and exit in the short run behavior of a general equilibrium model with industry dynamics. For tractability, and to preserve potential asymmetries in the impulse responses, I focus on the transition dynamics of the economy after shocks. Entry and exit are found to be insensitive to productivity shocks of reasonable magnitude. Moreover, the dynamics of GDP are insensitive to fluctuations in entry and exit rates, so that any asymmetries are negligible. As an application of the model, the paper also asks whether firing costs may interact with entry and exit to affect transition dynamics after shocks, finding that they do not. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2007.10.002
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 11 (2008)
Issue (Month): 3 (July)
Pages: 529-541

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Handle: RePEc:red:issued:06-69

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Related research

Keywords: Entry and exit; Business cycles; Productivity shocks; Transition dynamics; Asymmetry; Firing costs;

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  1. Campbell, J.R. & Fisher, J.D.M., 1996. "Aggreagate Employment Fluctuations with Microeconomic Asymmetries," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 430, University of Rochester - Center for Economic Research (RCER).
  2. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices, Review of Economic Dynamics campbell98, Review of Economic Dynamics.
  3. Addison, John T. & Teixeira, Paulino, 2003. "What Have We Learned About the Employment Effects of Severance Pay? Further Iterations of Lazear et al," IZA Discussion Papers 943, Institute for the Study of Labor (IZA).
  4. Veracierto, Marcelo, 2001. "Employment Flows, Capital Mobility, and Policy Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 571-95, August.
  5. Samaniego, Roberto M., 2008. "Can technical change exacerbate the effects of labor market sclerosis," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(2), pages 497-528, February.
  6. McQueen, Grant & Thorley, Steven, 1993. "Asymmetric business cycle turning points," Journal of Monetary Economics, Elsevier, Elsevier, vol. 31(3), pages 341-362, June.
  7. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers, Pennsylvania State - Department of Economics 1-87-5, Pennsylvania State - Department of Economics.
  8. Samaniego, Roberto M., 2006. "Do Firing Costs Affect The Incidence Of Firm Bankruptcy?," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 10(04), pages 467-501, September.
  9. Jeffrey R. Campbell, 1997. "Entry, Exit, Embodied Technology, and Business Cycles," NBER Working Papers 5955, National Bureau of Economic Research, Inc.
  10. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  11. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 16(3), pages 309-327, November.
  12. Cogley, T., 1989. "International Evidence On The Size Of The Random Walk In Output," Discussion Papers in Economics at the University of Washington, Department of Economics at the University of Washington 89-02, Department of Economics at the University of Washington.
  13. King, Robert G & Plosser, Charles I & Rebelo, Sergio T, 2002. "Production, Growth and Business Cycles: Technical Appendix," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 87-116, October.
  14. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  15. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(5), pages 915-38, October.
  16. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
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