ENDOGENOUS MARKET STRUCTURES AND THE MACROECONOMY by Federico Etro

This book is about the endogenous market structures (EMSs) approach to macroeconomic issues and reviews recent novel research on growth, trade and the business cycle. From a research point of view, it is a follow up of "Competition, Innovation, and Antitrust" (2007, Springer: New York and Berlin), but is dedicated to the macroeconomic and empirical implications of the theory of endogenous business creation, a topic on which economists as John Sutton (London School of Economics), Marc Melitz (Princeton University), Fabio Ghironi (Boston College), Pietro Peretto (Duke University) and many others, have been working in the last years. Chapter 1 reviews the standard neoclassical approach to macroeconomics. Chapter 2 reviews the theory of EMSs and applies it to general equilibrium contexts to study the mechanism of business creation. Chapter 3 introduces develops a model of the business cycle with endogenous business creation and strategic interactions and discusses optimal macroeconomic policy. Chapter 4 introduces EMSs in international trade, applies them to a dynamic framework due to Ghironi and Melitz, and derives implications for trade policy, export promotion policy, R&D policy and exchange rate policy. Chapter 5 introduces EMSs in the competition for the market and in the theory of Schumpeterian growth, studies macroeconomic policy, R&D policy and its international coordination, and provides also an empirical test on the determinants of R&D and on the investment in innovation by market leaders. Chapter 6 concludes with a non-technical discussion of the main results of the EMSs approach and employs them to discuss a number of recently debated issues concerning the macroeconomy and the current crisis, the process of business creation, the structure of markets of the New Economy and their implications for the aggregate economy, macroeconomic policy and competition and innovation policy.

Praises:

'For many decades, the field of industrial organization lived in the world of microeconomics, separately from the macroeconomic world of economic growth and business cycles. In recent years we have seen a fruitful convergence of the two. This book is a very useful contribution to this literature.' Avinash Dixit, Princeton University, United States of America.

'In this excellent book Etro reviews the EMSs approach to macroeconomics and derives several new results. The potential of this approach to change the way we think about the macroeconomy emerges clearly from the impressive range of topics to which it is successfully applied: business cycles, trade, growth. In each case, the approach challenges the traditional view and policy implications. It also calls for novel directions in empirical research, tapping previously overlooked data sources. Etro's discussion all of these aspects of the EMSs approach in the context of a coherent and comprehensive analytical framework provides an invaluable service to the profession.' Pietro Peretto, Duke University, United States of America.

'A must read for macroeconomists and international economists who value microfoundations and view micro-level dynamics as a key determinant of aggregate phenomena. It is equally valuable as a textbook for graduate teaching and reference for researchers.' Fabio Ghironi, Boston College, United States of America