On the Importance of Firm Heterogeneity, Business Dynamism, and Market Power Dynamics in the Macroeconomy

This PhD dissertation focuses on how firm heterogeneity and market power dynamics represent key elements in the study of macroeconomics. Depending on the stage in their life cycle, firms present different sizes, productivity, growth, and innovation behavior. Moreover, their inner characteristics predict their ability to extract rents and react to shocks. By taking these dynamics into account, our understanding of the economy's response to a wide range of economic phenomena is reshaped, from technological change to monetary or fiscal policy: these are the themes at the core of my dissertation. In this dissertation, I present three chapters, which are based on three papers I have written during my PhD. These chapters cover different aspects of firm dynamics, ranging from firm entry and exit to firm heterogeneity and market power. The main goal of the thesis is to introduce new theoretical models, which capture these characteristics in a tractable manner, and to use them to study recent macroeconomic trends as the rise of firms' market power, the decline in business dynamism, and the effectiveness of monetary policy.