Limited Re-Entry and Business Cycles

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This paper builds a model of firm dynamics to study the consequences of "limited re-entry" for macroeconomic dynamics. In the literature, exit has typically been modeled as a permanent decision whereby it is not possible for an exiting plant or firm to "re-enter" in the future. This paper relaxes this assumption by assuming that the exit decision is not permanent, but that an exiting producer still has a "limited" ability to re-enter. The model, reasonably calibrated, indicates that limited re-entry has made business cycles more volatile and persistent, and has contributed to the slow recovery following the 2007-09 recession.
Original languageEnglish
Pages (from-to)1-40
Number of pages39
JournalJournal of Economic Development
Issue number4
Publication statusPublished - Dec 2015


  • Entry
  • Exit
  • Entrepreneurship
  • Firm Dynamics


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