Corina Boar, New York University

Markups and Inequality

Abstract

We study the aggregate and distributional impact of product market interventions and profit taxes using a model of firm dynamics, credit constraints and incomplete markets. A key ingredient of our model is that markups are endogenous so that the markup a producer charges depends on the amount of competition it faces. We show that size-dependent subsidies that remove the distortions due to markup dispersion lead to sizable welfare gains and reduce inequality, even though they increase firm concentration and long-run misallocation. In contrast, policies that reduce concentration lead to large output, TFP and welfare losses and increase inequality. A tax on profits greatly depresses the incentives to create new firms, reducing labor demand, after-tax wages and welfare.

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Corina Boar is Assistant Professor of Economics. She holds a Ph.D. in Economics from the University of Rochester, an M.Sc. in Macroeconomics from the Barcelona Graduate School of Economics, and a B.Sc. in Finance from the Bucharest Academy of Economic Studies.

Boar’s research is in the field of macroeconomics. She uses both data analysis and quantitative models to understand the determinants of individuals’ consumption-savings and labor market decisions, as well as the ensuing implications for the evolution of macroeconomic aggregates, and the effectiveness of government policies. She was recently appointed as Faculty Research Fellow at the National Bureau of Economic Research.

Prior to joining NYU, Boar was a Postdoctoral Research Associate at Princeton University