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Welfare analysis and policy implications in Melitz-type model where markup differs across industries

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  • Kazuyoshi Ohki

Abstract

We construct a monopolistic competition model considering different markups across industries and firm-level heterogeneity of productivity. An excess entry occurs in low-markup (competitive) industry, and vice versa in high-markup (non-competitive) industry. To achieve the optimum allocation, a social planner should implement an appropriate mix of policies, whose requirement is tighter than the homogeneous-firm model under some situations. The total amount of optimum subsidy (tax) is dependent on the property of distribution when the elasticity of substitution between industries is above unity.

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  • Kazuyoshi Ohki, 2016. "Welfare analysis and policy implications in Melitz-type model where markup differs across industries," ISER Discussion Paper 0984, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0984
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    References listed on IDEAS

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