We analyze the relationship between imperfect competition and capital accumulation in a dual economy, with traditional and modern sectors and two types of agents (workers and capitalists). Workers allocate their time endowment between the two sectors. Capitalists accumulate wealth in the modern sector. The economy is open to capital flows, but capitalists face borrowing constraints. Non-competitive behavior of capitalists results in a rent, which is extracted from the workers and lowers employment in the modern sector. In the long-run, if capitalists are unconstrained, imperfect competition is beneficial for capital accumulation and growth, while it is detrimental in the converse case. Moreover, not-binding borrowing constraints lead to higher employment and wages. This can motivate the introduction of a subsidy on bequests that allows the economy to reach the unconstrained regime, and is welfare-enhancing for workers.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Kiminori Matsuyama, 1998.
"Endogenous Inequality,"
Discussion Papers
1238, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 1997.
"Beyond Balanced Growth,"
NBER Working Papers
6159, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)