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Entry costs and the macroenconomy

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  • Philippon, Thomas

Abstract

We propose a model to identify the causes of rising profits and concentration, and declining entry and investment in the US economy. Our approach combines a rich structural DSGE model with cross sectional identification from firm and industry date. Using asset prices, our model estimates the realized and anticipated shocks that drive the endogeneity of entry and concentration and recovers shocks to entry costs. We validate our approach by showing that the model implied entry shocks correlate with independently constructed measures of entry regulation and M&A activities. We conclude that entry costs have risen and that the ensuing decline in competition has depressed consumption by five to ten percent.

Suggested Citation

  • Philippon, Thomas, 2019. "Entry costs and the macroenconomy," CEPR Discussion Papers 13548, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:13548
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    Cited by:

    1. Simcha Barkai, 2020. "Declining Labor and Capital Shares," Journal of Finance, American Finance Association, vol. 75(5), pages 2421-2463, October.
    2. William L. Gamber, 2021. "Entry, Variable Markups, and Business Cycles," Finance and Economics Discussion Series 2021-077, Board of Governors of the Federal Reserve System (U.S.).
    3. Tommaso Bighelli & Filippo di Mauro & Marc J Melitz & Matthias Mertens, 2023. "European Firm Concentration and Aggregate Productivity," Journal of the European Economic Association, European Economic Association, vol. 21(2), pages 455-483.
    4. Savagar, Anthony, 2021. "Measured productivity with endogenous markups and economic profits," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    5. Chafwehé, Boris & Colciago, Andrea & Priftis, Romanos, 2025. "Reallocation, productivity, and monetary policy in an energy crisis," European Economic Review, Elsevier, vol. 173(C).
    6. Ascari, Guido & Colciago, Andrea & Silvestrini, Riccardo, 2023. "Business dynamism, sectoral reallocation and productivity in a pandemic," European Economic Review, Elsevier, vol. 156(C).
    7. Colciago, Andrea & Silvestrini, Riccardo, 2022. "Monetary policy, productivity, and market concentration," European Economic Review, Elsevier, vol. 142(C).

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