Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185473
Authors: 
Aloi, Marta
Dixon, Huw D.
Savagar, Anthony
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper 7275
Abstract: 
We develop a model of sluggish firm entry to explain short-run labor responses to technology shocks. We show that the labor response to technology and its persistence depend on the degree of returns to labor and the rate of firm entry. Existing empirical results support our theory based on short-run labor responses across US industries. We derive closed-form transition paths that show the result occurs because labor adjusts instantaneously whilst firms are sluggish, and closed-form eigenvalues show that stricter entry regulation results in slower convergence to steady state.
Subjects: 
deregulation
dynamic entry
endogenous entry costs
JEL: 
D25
E20
L11
O33
Document Type: 
Working Paper
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