This article constructs a decentralized growth model with two production sectors, one having competitive firms and the other oligopolists. Since capitalized pure profits for the latter sector constitute an asset which household savings must finance, we show that imperfect competition can reduce steady-state national output through both a "static effect" on allocative efficiency and a "dynamic effect" on aggregative capital accumulation. After presenting a theoretical analysis, we generate several numerical examples. The latter suggest that the "dynamic effect" of monopoly may be significantly larger than the "static effect" in practice.
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Eaton, Jonathan, 1989.
"Monopoly Wealth and International Debt,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 33-48, February.
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