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ENTRY COSTS, FINANCIAL FRICTIONS, AND CROSS-COUNTRY DIFFERENCES IN INCOME AND TFP.
- Source :
- Macroeconomic Dynamics; Jun2016, Vol. 20 Issue 4, p884-908, 25p
- Publication Year :
- 2016
-
Abstract
- This paper develops a model to assess the quantitative effects of entry costs and financial frictions on cross-country income and total factor productivity (TFP) differences, with a primary focus on the interaction between entry costs and financial frictions. The model is calibrated to match the establishment-level statistics for the U.S. economy, assuming a perfect financial market. The simulations based on the calibrated model show that entry costs and financial frictions together account for 55% and 46% of the cross-country variation in output and TFP in the data. Moreover, a substantial portion of the variation is accounted for by the interaction between entry costs and financial frictions. The main mechanism is that financial frictions amplify the effect of entry costs. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 13651005
- Volume :
- 20
- Issue :
- 4
- Database :
- Complementary Index
- Journal :
- Macroeconomic Dynamics
- Publication Type :
- Academic Journal
- Accession number :
- 115293670
- Full Text :
- https://doi.org/10.1017/S1365100514000649