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Does imperfect competition foster capital accumulation in a developing economy ?

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Listed author(s):
  • Pascal Belan

    ()

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, LEN - Laboratoire d'Economie de Nantes - UN - Université de Nantes)

  • Philippe Michel

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille)

  • Bertrand Wigniolle

    ()

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

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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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00268842.

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Date of creation: Jun 2005
Publication status: Published in Research in Economics, Elsevier, 2005, 59 (2), pp.189-208. <10.1016/j.rie.2005.04.006>
Handle: RePEc:hal:cesptp:halshs-00268842
DOI: 10.1016/j.rie.2005.04.006
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00268842
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

Keywords: imperfect competition; capital accumulation; altruism;

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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.
  2. Becker, Robert A. & Foias, Ciprian, 2007. "Strategic Ramsey equilibrium dynamics," Journal of Mathematical Economics, Elsevier, vol. 43(3-4), pages 318-346, April.
  3. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
  4. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
  5. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," American Economic Review, American Economic Association, vol. 90(2), pages 120-125, May.
  6. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-397, July.
  7. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  8. Codognato, Giulio & Gabszewicz, Jean J, 1993. "Cournot-Walras Equilibria in Markets with a Continuum of Traders," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(3), pages 453-464, July.
  9. Kiminori Matsuyama, 2000. "Endogenous Inequality," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 743-759.
  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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