IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Endogenous Market Structure and the Business Cycle

  • Federico Etro

    ()

  • Andrea Colciago

    ()

We introduce endogenous strategic interactions under competition in quantities and in prices together with endogenous entry in a dynamic stochastic general equilibrium model with flexible prices. The endogenous mark ups depend on the form of competition and on the degree of substitutability between goods, and they vary countercylically while profits are procyclical. Positive temporary shocks to productivity and government spending attract entry. Entry strengthens competition between firms, which temporary reduces mark ups and prices: this creates an intertemporal substitution effect which provides an extra boost to consumption. The model outperforms the standard RBC framework in matching impulse response functions and second moments for US data.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dems.unimib.it/repec/pdf/mibwpaper126.pdf
File Function: First version, 2007
Download Restriction: no

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 126.

as
in new window

Length: 30 pages
Date of creation: Nov 2007
Date of revision: Nov 2007
Handle: RePEc:mib:wpaper:126
Contact details of provider: Postal:
Piazza Ateneo Nuovo, 1 Milano 20126

Phone: +39 02 6448 3089
Fax: +39 02 6448 3085
Web page: http://dems.unimib.it
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 285-338.
  2. J. Galí & D. López-Salido & J. Vallés, 2003. "Understanding the effects of government spending on consumption," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  3. Ghironi, Fabio & Melitz, Marc J, 2004. "International Trade and Macroeconomic Dynamics with Heteroegenous Firms," CEPR Discussion Papers 4595, C.E.P.R. Discussion Papers.
  4. Florin Bilbiie & Fabio Ghironi & Marc Melitz, 2012. "Endogenous Entry, Product Variety and Business Cycles," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00680634, HAL.
  5. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  6. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  7. Paul Bergin & Giancarlo Corsetti, 2005. "Towards a theory of firm entry and stabilization policy," Economics Working Papers ECO2005/24, European University Institute.
  8. Mark Gertler & Antonella Trigari, 2006. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Computing in Economics and Finance 2006 525, Society for Computational Economics.
  9. Monique Ebell & Christian Haefke, 2002. "Product market deregulation and the U.S. employment miracle," Economics Working Papers 930, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2006.
  10. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  11. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  12. Satyajit Chatterjee & Russell Cooper, 1993. "Entry and Exit, Product Variety and the Business Cycle," NBER Working Papers 4562, National Bureau of Economic Research, Inc.
  13. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2006. "Multi-Product Firms and Product Switching," CEP Discussion Papers dp0736, Centre for Economic Performance, LSE.
  14. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
  15. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  16. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2010. "The Establishment-Level Behavior of Vacancies and Hiring," NBER Working Papers 16265, National Bureau of Economic Research, Inc.
  17. Robert G. King & Sergio T. Rebelo, 2000. "Resuscitating Real Business Cycles," NBER Working Papers 7534, National Bureau of Economic Research, Inc.
  18. Satyajit Chatterjee & Russell W. Cooper & B. Ravikumar, 1993. "Strategic complementarity in business formation: aggregate fluctuations and sunspot equilibria," Working Papers 93-9, Federal Reserve Bank of Philadelphia.
  19. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  20. Andrea Colciago & Anton Muscatelli & Tiziano Ropele & Patrizio Tirelli, 2006. "The Role of Fiscal Policy in a Monetary Union: Are National Automatic Stabilizers Effective?," CESifo Working Paper Series 1682, CESifo Group Munich.
  21. Andrea Colciago & Federico Etro, 2007. "Real Business Cycles with Cournot Competition and Endogenous Entry," Working Papers 135, University of Milano-Bicocca, Department of Economics, revised Feb 2008.
  22. Rotemberg, Julio J & Woodford, Michael, 1992. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1153-1207, December.
  23. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  24. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  25. Robert J. Barro, 1980. "Output Effects of Government Purchases," NBER Working Papers 0432, National Bureau of Economic Research, Inc.
  26. Lewis, Vivien, 2008. "Business cycle evidence on firm entry," Discussion Paper Series 1: Economic Studies 2008,08, Deutsche Bundesbank, Research Centre.
  27. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  28. F. Etro, 2007. "Endogenous Market Structures and Macroeconomic Theory," Review of Business and Economics, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, vol. 0(4), pages 517-540.
  29. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 1-25, 03.
  30. Federico Etro & Andrea Colciago, 2007. "Endogenous Market Structure and the Business Cycle," Working Papers 126, University of Milano-Bicocca, Department of Economics, revised Nov 2007.
  31. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  32. repec:rje:randje:v:37:y:2006:1:p:146-154 is not listed on IDEAS
  33. Federico Etro, 2007. "Stackelberg competition with endogenous entry," Working Papers 121, University of Milano-Bicocca, Department of Economics, revised 2007.
  34. Bergin, Paul R. & Corsetti, Giancarlo, 2008. "The extensive margin and monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1222-1237, October.
  35. Satyajit Chatterjee & Russell Cooper & B. Ravikumar, 1993. "Strategic Complementarity in Business Formation: Aggregate Fluctuations and Sunspot Equilibria," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 795-811.
  36. Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2008. "Monopoly Power and Endogenous Product Variety: Distortions and Remedies," NBER Working Papers 14383, National Bureau of Economic Research, Inc.
  37. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, 1.
  38. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," Working Papers 10-17, Center for Economic Studies, U.S. Census Bureau.
  39. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  40. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  41. Joaquim Oliveira Martins & Stefano Scarpetta, 1999. "The Levels and Cyclical Behaviour of Mark-ups Across Countries and Market Structures," OECD Economics Department Working Papers 213, OECD Publishing.
  42. Antonella Trigari, 2009. "Equilibrium Unemployment, Job Flows, and Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 1-33, 02.
  43. Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, 03.
  44. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, 1.
  45. Feenstra, Robert C., 2003. "A homothetic utility function for monopolistic competition models, without constant price elasticity," Economics Letters, Elsevier, vol. 78(1), pages 79-86, January.
  46. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-55, December.
  47. Devereux, Michael B. & Head, Allen C. & Lapham, Beverly J., 1996. "Aggregate fluctuations with increasing returns to specialization and scale," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 627-656, April.
  48. Etro, Federico, 2008. "Growth leaders," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1148-1172, September.
  49. Robert Shimer, 2009. "Convergence in Macroeconomics: The Labor Wedge," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 280-97, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mib:wpaper:126. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matteo Pelagatti)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.