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Inequality, Market Power, and Product Diversity

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  • Reto Foellmi
  • Josef Zweimueller

Abstract

We analyze a macroeconomic model of monopolistic competition in which consumers earn unequal incomes. When preferences are non-homothetic, the distribution of income affects equilibrium mark-ups and equilibrium product diversity.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 145.

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Handle: RePEc:zur:iewwpx:145

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Keywords: inequality; mark-ups; monopolistic competition;

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  1. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  2. Josef Zweimueller, . "Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," IEW - Working Papers 009, Institute for Empirical Research in Economics - University of Zurich.
  3. Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IZA Discussion Papers 273, Institute for the Study of Labor (IZA).
  4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, October.
  5. Bertola, G., 1998. "Marcroeconomics of Distribution and Growth," Economics Working Papers eco98/39, European University Institute.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  7. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June.
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