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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
    Date of revision:
    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. Rafael Rob, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 487-504.
    2. Axel, Bo, 1977. " Search Market Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(1), pages 20-40.
    3. Fershtman, Chaim & Fishman, Arthur, 1992. "Price Cycles and Booms: Dynamic Search Equilibrium," American Economic Review, American Economic Association, vol. 82(5), pages 1221-33, December.
    4. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
    5. Reinganum, Jennifer F, 1979. "A Simple Model of Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 851-58, August.
    6. Fishman, A., 1988. "Search Technology, Staggered Price Setting And Price Dispersion," Papers 28-88, Tel Aviv.
    7. Albrecht, James W & Jovanovic, Boyan, 1986. "The Efficiency of Search under Competition and Monopsony," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1246-57, December.
    8. Saul Lach, 2002. "Existence and Persistence of Price Dispersion: an Empirical Analysis," NBER Working Papers 8737, National Bureau of Economic Research, Inc.
    9. Albrecht, James & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Papers 83-10, C.V. Starr Center for Applied Economics, New York University.
    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. 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.
    12. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May.
    13. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    14. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
    15. MacMinn, Richard D, 1980. "Search and Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 308-27, April.
    16. Peter Diamond, 1985. "Consumer Differences and Prices in a Search Model," Working papers 404, Massachusetts Institute of Technology (MIT), Department of Economics.
    17. 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.
    18. 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.
    19. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
    20. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
    21. 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.
    22. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    23. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
    24. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    25. Roland Benabou, 1992. "Inflation and Efficiency in Search Markets," Review of Economic Studies, Oxford University Press, vol. 59(2), pages 299-329.
    26. 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.
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