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Firm entry and aggregate efficiency growth: An optimal dynamic - Program of entry and R&D investment

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  • Asma Raies

Abstract

The effect of entry on the aggregate efficiency growth is still theoretically and empirically unresolved. Many studies focused on this effect in short and long-run, without considering the dynamic transition and how do entry affect the convergence of the industrytoward its long-run equilibrium? This paper aims to provide an answer and to fill this gap by employingoptimal control principles. Our model exhibits saddlepath stability and shows that the effect of entry and entry liberalizing policy (reducing the entry cost) on the aggregate efficiency growth may be positive, negative or nil depending on the industry’s initial characteristics (size and R&D). This theoretical result can justify the inconclusive current empirical evidence.

Suggested Citation

  • Asma Raies, 2013. "Firm entry and aggregate efficiency growth: An optimal dynamic - Program of entry and R&D investment," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(3), pages 355-376, December.
    • Handle: RePEc:liu:liucej:v:10:y:2013:i:3:p:355-376
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    More about this item

    Keywords

    Firms entry; R&D; aggregate efficiency; endogenous growth;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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