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Can Income Equality Increase Competitiveness?

  • Fishman, Arthur
  • Simhon, Avi
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    This paper explores the relationship between income distribution, prices, production efficiency and aggregate output in a decentralized search economy. We show that income distribution determines how competitive the market is, and thereby affects production efficiency and aggregate output. It is shown that it is generally possible to engineer a judicious transfer of income from high to low income individuals which simultaneously increases income equality, competitiveness, and aggregate output.

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    File URL: http://purl.umn.edu/14983
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    Paper provided by Hebrew University of Jerusalem, Department of Agricultural Economics and Management in its series Discussion Papers with number 14983.

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    Date of creation: 2003
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    Handle: RePEc:ags:huaedp:14983
    Contact details of provider: Postal: Faculty of Agriculture, Food and Environmental Quality Sciences Hebrew University of Jerusalem, P.O. Box 12, Rehovot 76100
    Phone: 08-9481230
    Fax: 08-9466267
    Web page: http://departments.agri.huji.ac.il/economics/indexe.html

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    1. Benabou, Roland, 1992. "Inflation and Efficiency in Search Markets," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 299-329, April.
    2. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.
    3. Jennifer F. Reinganum, 1978. "A Simple Model of Equilibrium Price Dispersion," Discussion Papers 335, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    5. Albrecht, James W & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Paper Series 99, Research Institute of Industrial Economics.
    6. Diamond, Peter, 1987. "Consumer Differences and Prices in a Search Model," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 429-36, May.
    7. Saul Lach, 2002. "Existence and Persistence of Price Dispersion: an Empirical Analysis," NBER Working Papers 8737, National Bureau of Economic Research, Inc.
    8. Axel, Bo, 1977. " Search Market Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(1), pages 20-40.
    9. Albrecht, James W & Vroman, Susan B, 1998. "Nash Equilibrium Efficiency Wage Distributions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 183-203, February.
    10. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October.
    11. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May.
    12. MacMinn, Richard D, 1980. "Search and Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 308-27, April.
    13. Albrecht, James & Jovanovic, Boyan, 1985. "The Efficiency of Search Under Competition and Monopsony," Working Papers 85-15, C.V. Starr Center for Applied Economics, New York University.
    14. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
    15. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    16. Chaim Fershtman & Arthur Fishman & Avi Simhon, 2003. "Inflation and Efficiency in a Search Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 205-222, February.
    17. Fishman, A., 1988. "Search Technology, Staggered Price Setting And Price Dispersion," Papers 28-88, Tel Aviv.
    18. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
    19. Brown, Jeffrey, 2000. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Working Paper Series rwp00-007, Harvard University, John F. Kennedy School of Government.
    20. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
    21. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
    22. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
    23. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    24. Fershtman, C. & Fishman, A., 1989. "Price Cycles And Booms Dynamic Search Equilibrium," Papers 8922, Tilburg - Center for Economic Research.
    25. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    26. Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 487-504, July.
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