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Imperfect competition, technical progress and capital accumulation

  • Biancamaria d'Onofrio
  • Bertrand Wigniolle

This paper explores the consequences of imperfect competition on capital accumulation. The framework is an OLG growth model with altruistic agents. Two types of long run equilibria exist : egoistic or altruistic.We assume both competitive and non-competitive firms exist, the latter being endowed with more productive technology. They behave strategically on the labor market : they take into account the impact of their demand for labor on the equilibrium wage and on their profit. The effect of technical progress for a non-competitive firm depends on the initial productivity of the firm and on the type of steady state (egoistic or altruistic). An increase in the productivity of the most productive firm has a negative impact on capital accumulation in an egoistic steady state, and a positive one in an altruistic steady state. An increase in the productivity of the competitive sector can have various effects on capital accumulation. If the productivity levels of the non-competitive firms are close enough, capital accumulation increases in an egoistic steady state and decreases in an altruistic one. But, the impact of increasing productivity in the competitive sector can be reversed if the productivity of the less productive non-competitive firm is low enough.

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Article provided by The International Society for Economic Theory in its journal International Journal of Economic Theory.

Volume (Year): 6 (2010)
Issue (Month): 4 ()
Pages: 355-366

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Handle: RePEc:bla:ijethy:v:6:y:2010:i:4:p:355-366
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