Wealth Concentration, Entrepreneurial Activity and Firms' Market Power: Theory, Evidence and Methods
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Authors
Brien, Samuel
Date
Type
thesis
Language
eng
Keyword
Inequality , Market Power , Wealth concentration , Schumpeterian , Entrepreneurship
Alternative Title
Abstract
This dissertation examines the effect of household wealth concentration on entrepreneurial activity and firms’ market power and presents methods developed to support the empirical investigation. Both theoretical and empirical evidence suggest that an increase in wealth concentration is associated with a future rise in firms’ market power and that entrepreneurial firm creation may play a significant role in the relationship between household wealth distribution and firms’ market power.
A step-by-step model of endogenous innovation and growth is developed in Chapter 2, in which firm entry is driven by entrepreneurial activity conducted by ex-ante identical households who differ only in their wealth. This general equilibrium model generates an endogenous wealth distribution and an endogenous measure of firms’ markups. Under the calibrated benchmark, an increase in wealth concentration yields a decrease in firm entry and an increase in firms’ market power. It is found that a small redistributive wealth tax is slightly growth-enhancing as it reduces firms’ market power by stimulating firm entry and business competitiveness.
In Chapter 3, the relationship between wealth concentration, firm entry, and firms’ markups is investigated empirically using panel data for three OECD countries. A panel VAR is estimated by applying an iterated bootstrap bias-correction method to the least square dummy variable estimator. It is found that positive shocks in wealth concentration are significantly associated with future increases in aggregate markup via firm entry. A new impulse response decomposition method is used to quantify the contribution of the firm entry channel in the relationship between wealth concentration and markup.
Chapter 4 features a new unit root test based on the unconditional likelihood ratio for autoregressive processes of arbitrary order. The test is nearly efficient in the sense that its asymptotic local power function is indistinguishable from the Gaussian envelope and that its power and size properties compare advantageously to other nearly efficient tests. The challenge posed by nuisance parameters in the higher-order autoregressive model is only now being tackled successfully to offer a proof for the distribution of the test statistic based on the fully maximized likelihood ratio where previous work relied on a plug-in approach instead.
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ProQuest PhD and Master's Theses International Dissemination Agreement
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Copying and Preserving Your Thesis
This publication is made available by the authority of the copyright owner solely for the purpose of private study and research and may not be copied or reproduced except as permitted by the copyright laws without written authority from the copyright owner.