This paper studies optimal taxation in a general equilibrium macro model with endogenous entry. We compare the constant … the misalignment of markups on goods and leisure, and an entry distortion due to the misalignment of the consumer surplus … effect and the profit destruction effect of entry. The two distortions interact in determining the wedge between the market …

formation. Models with an extensive investment margin, i.e. endogenous firm and product entry, have difficulties explaining … these two phenomena simultaneously. Considering different variants of an endogenous-entry business cycle model, we show that … crowding-in of both consumption and entry can be generated only under very specific assumptions. In a static model with full …