Working Paper

"Firm Entry Decline, Market Structure, and Dominant Firm's Productivity," 2020 (new version coming soon!).

Since the number of new entrants per working-age population has declined dramatically during the last forty years in the United States, it created concerns for the economy regarding job creation, resource reallocation, and aggregate productivity. At the same time, the productivity gap between the leading firms and the rest has widened. Motivated by these two empirical facts, I build a general equilibrium firm dynamics model a la Hopenhayn (1992) and Shimomura and Thisse (2012) with the dominant firm and competitive fringe to measure the quantitative effects of larger productivity differences between the frontier firms and laggard firms on new firm’s entry. The main finding is that an increase in leading firm’s productivity can explain one-third of the entry decline of new firms. The mechanism that generates the result is because of the lowered price (which is set by the more productive leading firm) and the corresponding selection effect. The model provided here is the unified framework in the sense that it endogenously incorporates other long-run trends of higher concentration and markup, in addition to the entry decline. These results open up the questions related to policies such as size-dependent policy and taxing superstar firms.

Conference Presentations

2019 Econometric Society European Winter Meeting (Rotterdam), International Conference on Game Theory (NY), Midwest Economics Association Annual Meeting (MO), Midwest Macroeconomics Meetings (GA), Eastern Economic Association Conference (NY).

2018 Southern Economic Association Annual Meetings (DC).

"Uncertainty Shocks and the Informal Economy," with Joonseok Jason Oh

We investigate how macro uncertainty affects aggregate economic activity under the presence of an informal economy. According to SVAR analysis, empirical evidence suggests that the informal economy expands, while the formal economy contracts in a recession caused by increased macro uncertainty. Moreover, the informal economy amplifies the adverse effects of macro uncertainty on formal economic activity. We show that a New Keynesian model with an informal economy can successfully account for empirical findings. In a recession, the reallocation of employment from the formal to the informal economy occurs because the firm’s marginal value of formal employment falls by more than that of informal employment. Moreover, due to the reallocation effects, the informal economy amplifies the volatility of the formal economy.

Work in Progress

"Common Ownership and Entry Deterrence," with Sunghun Cho.

"Working Capital Constraint, Bankruptcy Choice, and Formal-Informal Dynamics."

Non-Academic / Policy Works (written in Korean)

Link to LG Economic Research Institute and Media Coverage