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Monopoly Rights: A Barrier to Riches

  • Edward C. Prescott
  • Stephen L. Parente

Our thesis is that poor countries are poor because they employ arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently. In this paper, we analyze the consequences of one such arrangement. In each industry, the arrangement enables a coalition of factor suppliers to be the monopoly seller of its input services to all firms using a particular production process. We find that eliminating this monopoly arrangement could well increase output by roughly a factor of 3 without any increase in inputs.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 5 (December)
Pages: 1216-1233

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:5:p:1216-1233
Note: DOI: 10.1257/aer.89.5.1216
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  1. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "The Poverty of Nations: A Quantitative Exploration," NBER Working Papers 5414, National Bureau of Economic Research, Inc.
  4. Allen, B. & Deneckere, R. & Faith, T. & Kovenock, D., 1994. "Capacity Precommitment as a Barrier to Entry: A Bertrand- Engeworth Approach," Papers 9483, Tilburg - Center for Economic Research.
  5. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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  7. 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.
  8. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  9. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
  10. John Laitner, 1982. "Monopoly and Long-Run Capital Accumulation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 143-157, Spring.
  11. repec:oup:qjecon:v:107:y:1992:i:2:p:407-37 is not listed on IDEAS
  12. Thomas J. Holmes & James A. Schmitz, 1994. "Resistance to technology and trade between areas," Staff Report 184, Federal Reserve Bank of Minneapolis.
  13. Dixit, Avinash K., 1978. "A Model of Duopoly Suggesting a Theory of Entry Barriers," The Warwick Economics Research Paper Series (TWERPS) 125, University of Warwick, Department of Economics.
  14. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  15. Bergson, Abram, 1973. "On Monopoly Welfare Losses," American Economic Review, American Economic Association, vol. 63(5), pages 853-70, December.
  16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  17. Clark, Gregory, 1987. "Why Isn't the Whole World Developed? Lessons from the Cotton Mills," The Journal of Economic History, Cambridge University Press, vol. 47(01), pages 141-173, March.
  18. repec:oup:qjecon:v:104:y:1989:i:3:p:537-64 is not listed on IDEAS
  19. Thomas J. Holmes & James A. Schmitz, 1995. "Resistance to new technology and trade between areas," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-17.
  20. repec:oup:restud:v:43:y:1976:i:2:p:217-35 is not listed on IDEAS
  21. Cowling, Keith & Mueller, Dennis C, 1978. "The Social Costs of Monopoly Power," Economic Journal, Royal Economic Society, vol. 88(352), pages 727-48, December.
  22. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
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