Entry Costs and the Macroeconomy

59 Pages Posted: 13 Mar 2019

See all articles by Thomas Philippon

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: February 2019

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.

Keywords: Competition, corporate investment, Tobin's q, zero lower bound

Suggested Citation

Philippon, Thomas, Entry Costs and the Macroeconomy (February 2019). CEPR Discussion Paper No. DP13548, Available at SSRN: https://ssrn.com/abstract=3346337

Thomas Philippon (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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