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The welfare cost of imperfect competition and distortionary taxation

  • Magnus Jonsson

    (Sveriges Riksbank)

Registered author(s):

    The welfare cost of imperfect competition in the product and labor markets in the United States is quantified in a dynamic general equilibrium model. We find that the welfare cost of imperfect competition in the product market is 3.62 percent while it is 0.58 percent in the labor market, taking the transition path from the distorted to the optimal steady state into account. If we also take into account that the U.S. economy is characterized by distortionary taxation, the welfare cost of the product market distortion increases to 13.51 percent and the labor market distortion to 4.35 percent. (Copyright: Elsevier)

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    File URL: http://dx.doi.org/10.1016/j.red.2007.01.002
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    Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

    Volume (Year): 10 (2007)
    Issue (Month): 4 (October)
    Pages: 576-594

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    Handle: RePEc:red:issued:04-90
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