This paper studies the role of entry and exit in the short run behavior of a general equilibrium model with industry dynamics. For tractability, and to preserve potential asymmetries in the impulse responses, I focus on the transition dynamics of the economy after shocks. Entry and exit are found to be insensitive to productivity shocks of reasonable magnitude. Moreover, the dynamics of GDP are insensitive to fluctuations in entry and exit rates, so that any asymmetries are negligible. As an application of the model, the paper also asks whether firing costs may interact with entry and exit to affect transition dynamics after shocks, finding that they do not. (Copyright: Elsevier)
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 11 (2008) Issue (Month): 3 (July) Pages: 529-541 Download reference. The following formats are available: HTML,
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Find related papers by JEL classification: D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
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