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Endogenous Market Structures and the Business Cycle

  • colciago, andrea
  • Rossi, Lorenza

We propose a flexible prices model where endogenous market structures and search and matching frictions in the labor market interact endogenously. The interplay between firms endogenous entry, strategic interactions among producers and labor market frictions represents a strong amplification channel of technology shocks on labor market variables, and helps addressing the unemployment-volatility puzzle. Consistently with U.S. evidence, new firms create a large fraction of new jobs and grow faster than more mature firms, net firms' entry is procyclical and the price mark up is countercyclical.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29629.

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Date of creation: Feb 2011
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Handle: RePEc:pra:mprapa:29629
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