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Competition, "welfare" and macroeconomics- a classical/Sraffian perspe ctive

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  • White, Graham

Abstract

An essential point to arise out of macroeconomic literature of the last twenty years is that imperfect competition in product markets allows scope for aggregate demand to affect the level of output and employment; and to have positive impacts on "welfare". The present paper considers the connection between "imperfect competition" and macroeconomic outcomes from a Sraffian perspective. In this case, the appropriate categorisation is one of restricted versus unrestricted competition: essentially the ability of intersectoral capital mobility to enforce a uniform rate of profit. The paper also considers the significance of product differentiation, which is generally assumed to be the defining characteristic of imperfectly competitive markets. A Sraffian approach makes clear the limited significance of the concept product differentiation in a multi-commodity framework particularly in drawing hard and fast implications about "welfare". The investigation of connections between restricted competition and macro outcomes therefore turns largely on the significance of restrictions on mobility for output and employment multipliers.

Suggested Citation

  • White, Graham, 2009. "Competition, "welfare" and macroeconomics- a classical/Sraffian perspe ctive," Working Papers 2009-02, University of Sydney, School of Economics.
  • Handle: RePEc:syd:wpaper:2123/7066
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    File URL: http://hdl.handle.net/2123/7066
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    2. Kurz,Heinz D. & Salvadori,Neri, 1997. "Theory of Production," Cambridge Books, Cambridge University Press, number 9780521588676.
    3. Leonardo Vera, 2006. "Representative agent meets class structure: imperfect competition and the balanced-budget multiplier," Cambridge Journal of Economics, Oxford University Press, vol. 30(5), pages 783-796, September.
    4. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-1660, December.
    5. Oliver D. Hart, 1985. "Monopolistic Competition in the Spirit of Chamberlin: A General Model," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 529-546.
    6. Bidard, Christian, 1998. "Laws on Long-Term Prices," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(4), pages 453-465, September.
    7. Mankiw, N. Gregory, 1988. "Imperfect competition and the Keynesian cross," Economics Letters, Elsevier, vol. 26(1), pages 7-13.
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