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Technological Foundations for Dynamic Models with Endogenous Entry

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  • Etro, Federico

Abstract

I explore the technological foundations of dynamic entry models à la Bilbiie-Ghironi-Melitz where the endogenous creation of new inputs can generate either neoclassical business cycle dynamics or long run growth. Under a general CRS technology in labor and intermediate goods produced by monopolistic innovators, substitutability between inputs drives markups and profitability of innovations as functions of the number of firms. Decreasing profitability tends to generate a stable steady state associated with a propagation of shocks fostered by endogenous productivity. The decentralized equilibrium is inefficient and I characterize the optimal policy to fix static and dynamic inefficiencies.

Suggested Citation

  • Etro, Federico, 2020. "Technological Foundations for Dynamic Models with Endogenous Entry," European Economic Review, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:eecrev:v:128:y:2020:i:c:s0014292120301483
    DOI: 10.1016/j.euroecorev.2020.103517
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    Cited by:

    1. Cavallari, Lilia, 2022. "The international real business cycle when demand matters," Journal of Macroeconomics, Elsevier, vol. 73(C).
    2. Etro, Federico, 2023. "Technologies for endogenous growth," Journal of Mathematical Economics, Elsevier, vol. 105(C).
    3. Paolo Bertoletti & Federico Etro, 2022. "Monopolistic competition, as you like it," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 293-319, January.

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    More about this item

    Keywords

    Entry; monopolistic competition; variable markups; technology; growth; business cycle;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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