Endogenous Entry, Product Variety, and Business Cycles
| Title: | Endogenous Entry, Product Variety, and Business Cycles |
| Author: |
Bilbiie, Florin O.; Ghironi, Fabio; Melitz, Marc J.
Note: Order does not necessarily reflect citation order of authors. |
| Citation: | Bilbiie, Florin O., Fabio Ghironi, and Marc J. Melitz. 2012. Endogenous entry, product variety, and business cycles. Journal of Political Economy 120(2): 304-345. |
| Full Text & Related Files: |
BGMRBCJPERevision2_120312.pdf (414.7Kb; PDF) 
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| Abstract: | This paper builds a framework for the analysis of macroeconomic fluctuations that incorporates the endogenous determination of the number of producers and products over the business cycle. Economic expansions induce higher entry rates by prospective entrants subject to sunk investment costs. The sluggish response of the number of producers generates a new and potentially important endogenous propagation mechanism for business cycle models. The return to investment determines household saving decisions, producer entry, and the allocation of labor across sectors. Our framework replicates several features of business cycles and predicts procyclical profits even for preference specifications that imply countercyclical markups. |
| Published Version: | doi:10.1086/665825 |
| Other Sources: | http://www.nber.org/papers/w13646 |
| Terms of Use: | This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:10914281 |
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