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Does imperfect competition foster capital accumulation in a developing economy?

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Listed author(s):
  • Belan, Pascal
  • Michel, Philippe
  • Wigniolle, Bertrand

Abstract

We analyze the relationship between imperfect competition and capital accumulation in a dual economy, with traditional and modern sectors and two types of agents (workers and capitalists). Workers allocate their time endowment between the two sectors. Capitalistsaccumulate wealth in the modern sector. The economy is open to capital flows, but capitalists face borrowing constraints. Non-competitive behavior of capitalists results in a rent which is extracted from the workers and lowers employment in the modern sector. In the longrun,if capitalists are unconstrained, imperfect competition is beneficial for capital accumulation and growth, while it is detrimental in the converse case. Moreover, not-binding borrowing constraints lead to higher employment and wages. This can motivate the introduction of a subsidy on bequests which allows the economy to reach theunconstrained regime, and is welfare-enhancing for workers.

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Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 59 (2005)
Issue (Month): 2 (June)
Pages: 189-208

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Handle: RePEc:eee:reecon:v:59:y:2005:i:2:p:189-208
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622941

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Find related papers by JEL classification:
  • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
  • D9 - Microeconomics - - Intertemporal Choice
  • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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  1. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
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  10. Gabszewicz, J.J. & Michel, P., "undated". "Oligopoly equilibrium in exchange economies," CORE Discussion Papers RP 1265, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Bertrand Wigniolle & Philippe Michel & Pascal Belan, 2002. "Pension funds and capital accumulation," Economics Bulletin, AccessEcon, vol. 4(1), pages 1-8.
  12. repec:ebl:ecbull:v:4:y:2002:i:1:p:1-8 is not listed on IDEAS
  13. John Laitner, 1982. "Monopoly and Long-Run Capital Accumulation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 143-157, Spring.
  14. Pascal Belan & Philippe Michel & Bertrand Wigniolle, 2007. "Capital Accumulation, Welfare, and the Emergence of Pension-Fund Activism," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 54-82, March.
  15. Bourguignon, Francois, 1981. "Pareto Superiority of Unegalitarian Equilibria in Stiglitz' Model of Wealth Distribution with Convex Saving Function," Econometrica, Econometric Society, vol. 49(6), pages 1469-1475, November.
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Cited by:

  1. repec:hal:journl:halshs-00118568 is not listed on IDEAS
  2. Biancamaria d'Onofrio & Bertrand Wigniolle, 2010. "Imperfect competition, technical progress and capital accumulation," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(4), pages 355-366.

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