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The Interaction and Sequencing of Policy Reforms
In what order should a developing country adopt policy reforms? Do some policies complement each other? Do others substitute for each other? To address these questions, we develop a two-country dynamic general equilibrium model with entry and exit of firms that are monopolistic competitors. Distortions in the model include barriers to entry of firms, barriers to international trade, and barriers to contract enforcement. We find that a reform that reduces one of these distortions has different effects depending on the other distortions present. In particular, reforms to trade barriers and ...
Who is screened out of social insurance programs by entry barriers? Evidence from consumer bankruptcies
Entry barriers into social insurance programs will be effective screening devices if they cause only those individuals receiving higher benefits from a program to participate in that program. We find evidence for this by using plausibly exogenous variations in travel-related entry costs into the Canadian consumer bankruptcy system. Using detailed balance sheet and travel data, we find that higher travel-related entry costs reduce bankruptcies from individuals with lower financial benefits of bankruptcy (unsecured debt discharged, minus secured assets forgone). When compared across filers, ...
Firm Entry and Exit and Aggregate Growth
Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm?s efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. ...