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Inequality, market power, and product diversity

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  • Foellmi, Reto
  • Zweimuller, Josef

Abstract

We analyze a macroeconomic model of monopolistic competition in which consumers earn unequal incomes. When preferences are non-homothetic, the distribution of income affects equilibrium mark-ups and equilibrium product diversity.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 82 (2004)
Issue (Month): 1 (January)
Pages: 139-145

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Handle: RePEc:eee:ecolet:v:82:y:2004:i:1:p:139-145

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  1. Zweimüller, Josef, 1998. "Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," CEPR Discussion Papers 1880, C.E.P.R. Discussion Papers.
  2. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762.
  3. Bertola, G., 1998. "Marcroeconomics of Distribution and Growth," Economics Working Papers eco98/39, European University Institute.
  4. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 537-64, August.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  6. Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IZA Discussion Papers 273, Institute for the Study of Labor (IZA).
  7. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June.
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