IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v235y2024ics0165176524000107.html

Market size, income heterogeneity, and trade

Author

Listed:
  • Kichko, Sergei
  • Picard, Pierre M.

Abstract

This paper studies the effects of market enlargement in the context of monopolistic competition, variable markups, and income heterogeneity. Market enlargement increases product diversity and entices firms to reduce prices and markups due to pro-competitive effects. It benefits all individuals but more high-income ones. The strength of the market enlargement effect is independent of income inequality for Pollak’s (1971) preferences. In an open economy, the market enlargement of one country reduces prices globally while it fosters firm entry in this country and exit in the other country. Welfare gains are also larger for higher-income groups. A calibration exercise suggests that effects on market outcome and welfare gains are sizable.

Suggested Citation

  • Kichko, Sergei & Picard, Pierre M., 2024. "Market size, income heterogeneity, and trade," Economics Letters, Elsevier, vol. 235(C).
    • Handle: RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000107
    DOI: 10.1016/j.econlet.2024.111526
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176524000107
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2024.111526?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.