Income Distribution, Market Structure, and Individual Welfare
AbstractThis paper explores how income distribution affects market structure, prices, and economic well-being of different consumer groups. I consider a general equilibrium model of monopolistic competition with free entry, heterogenous firms and consumers that share identical but non-homothetic preferences. The results in the paper suggest that poverty reduction might be of a greater importance than lowering income inequality, as lower income inequality does not necessarily lead to welfare gains of the poor. In particular, I show that higher income inequality may benefit the poor via a trickle-down effect operating through the entry of firms into the market.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.
Volume (Year): 9 (2009)
Issue (Month): 1 (December)
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Web page: http://www.degruyter.com
Other versions of this item:
- Tarasov, Alexander, 2007. "Income Distribution, Market Structure, and Individual Welfare," MPRA Paper 7682, University Library of Munich, Germany, revised Jan 2008.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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