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Competition, "welfare" and macroeconomics- a classical/Sraffian perspe ctive

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  • White, Graham
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    Abstract

    An essential point to arise out of macroeconomic literature of the last twenty years is that imperfect competition in product markets allows scope for aggregate demand to affect the level of output and employment; and to have positive impacts on "welfare". The present paper considers the connection between "imperfect competition" and macroeconomic outcomes from a Sraffian perspective. In this case, the appropriate categorisation is one of restricted versus unrestricted competition: essentially the ability of intersectoral capital mobility to enforce a uniform rate of profit. The paper also considers the significance of product differentiation, which is generally assumed to be the defining characteristic of imperfectly competitive markets. A Sraffian approach makes clear the limited significance of the concept product differentiation in a multi-commodity framework particularly in drawing hard and fast implications about "welfare". The investigation of connections between restricted competition and macro outcomes therefore turns largely on the significance of restrictions on mobility for output and employment multipliers.

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    File URL: http://hdl.handle.net/2123/7066
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    Bibliographic Info

    Paper provided by University of Sydney, School of Economics in its series Working Papers with number 2009-02.

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    Date of creation: Jun 2009
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    Handle: RePEc:syd:wpaper:2123/7066

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    Postal: Sydney, NSW 2006
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    Web page: http://sydney.edu.au/arts/economics
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    Keywords: Imperfect competition; macroeconomics; Sraffian; welfare;

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    1. Mankiw, N. Gregory, 1988. "Imperfect competition and the Keynesian cross," Economics Letters, Elsevier, vol. 26(1), pages 7-13.
    2. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-60, December.
    3. Hart, Oliver D, 1985. "Monopolistic Competition in the Spirit of Chamberlin: A General Model," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 529-46, October.
    4. Bidard, Christian, 1998. "Laws on Long-Term Prices," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(4), pages 453-65, September.
    5. Leonardo Vera, 2006. "Representative agent meets class structure: imperfect competition and the balanced-budget multiplier," Cambridge Journal of Economics, Oxford University Press, vol. 30(5), pages 783-796, September.
    6. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
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