We analyse the implications for the dynamics of capital accumulation of market power and endogenous demand elasticities, in an environment in which the latter are affected by the number of competitors in each industry. In equilibrium the interest rate increases as capital accumulates, even though the marginal product of capital is constant. Under standard assumptions both a steady-state and a balanced growth path exist, and the possibility of multiple equilibrium paths (for given initial conditions) arises. It is argued that the latter feature matches several empirical observations.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1052.
Find related papers by JEL classification: L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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