On the Effects of Income Heterogeneity in Monopolistically Competitive Markets
| Autor: | Sergei Kichko, Pierre M. Picard |
|---|---|
| Přispěvatelé: | Fonds National de la Recherche - FnR [sponsor] |
| Rok vydání: | 2022 |
| Předmět: |
Economics and Econometrics
International economics [B11] [Business & economic sciences] History nonhomothetic additive preferences Polymers and Plastics Business and International Management Economie internationale [B11] [Sciences économiques & de gestion] Finance Monopolistic competition Industrial and Manufacturing Engineering income inequality |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.4316006 |
| Popis: | This paper studies the market and welfare effects of income heterogeneity in monopolistically competitive product markets in the context of nonhomothetic preferences. In a closed economy, where richer individuals' expenditures are less sensitive to price change compared to poorer ones', a mean-preserving contraction of income distribution entices firms to charge higher markups, reduce output, and fosters creation of new varieties. General equilibrium effects have a negative impact on poorer individuals and, in specific circumstances, on the whole population. In an open economy with free trade, lower income inequality in one country creates price divergence between trading countries. Lower inequality not only further decreases trade volumes and values but also creates a general equilibrium effect that may negatively affect poor individuals. Finally, general equilibrium effects are shown to be quantitatively nonnegligible. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|