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Does imperfect competition foster capital accumulation in a developing economy

Author Info

  • Pascal Belan

    ()

    (LEN and EUREQua)

  • Philippe Michel

    (GREQAM and EUREQua)

  • Bertrand Wigniolle

    ()

    (EUREQua)

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. Capitalists accumulate 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 long-run, 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 that allows the economy to reach the unconstrained regime, and is welfare-enhancing for workers.

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Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v05026.

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Length: 27 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:mse:wpsorb:v05026
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Keywords: Imperfect competition; capital accumulation; altruism.;

Other versions of this item:

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

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  9. 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.
  10. repec:ebl:ecbull:v:4:y:2002:i:1:p:1-8 is not listed on IDEAS
  11. Pascal Belan & Philippe Michel & Bertrand Wigniolle, 2007. "Capital accumulation, welfare and the emergence of pension fund activism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00268847, HAL.
  12. N. Gregory Mankiw, 1999. "The Savers-Spenders Theory of Fiscal Policy," Harvard Institute of Economic Research Working Papers 1888, Harvard - Institute of Economic Research.
  13. 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 1469-75, November.
  14. JASKOLD GABSZEWICZ, Jean & VIAL, Jean-Philippe, . "Oligopoly "à la Cournot" in a general equilibrium analysis," CORE Discussion Papers RP -106, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. John Laitner, 1982. "Monopoly and Long-Run Capital Accumulation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 143-157, Spring.
  16. 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.
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Cited by:

  1. Biancamaria D'Onofrio & Bertrand Wigniolle, 2010. "Imperfect competition, technical progress and capital accumulation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00185321, HAL.
  2. repec:hal:journl:halshs-00118568 is not listed on IDEAS

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