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Inequality, Market Power, and Product Diversity

Author

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  • Reto Foellmi
  • Josef Zweimueller

Abstract

We analyze a macroeconomic model of monopolistic competition in which consumers earn unequal incomes. When preferences are non-homothetic, the distribution of income affects equilibrium mark-ups and equilibrium product diversity.

Suggested Citation

  • Reto Foellmi & Josef Zweimueller, "undated". "Inequality, Market Power, and Product Diversity," IEW - Working Papers 145, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:145
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    File URL: http://www.econ.uzh.ch/static/wp_iew/iewwp145.pdf
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    References listed on IDEAS

    as
    1. Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IZA Discussion Papers 273, Institute for the Study of Labor (IZA).
    2. Bertola, Giuseppe, 2000. "Macroeconomics of distribution and growth," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 9, pages 477-540 Elsevier.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Zweimuller, Josef, 2000. "Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," Journal of Economic Growth, Springer, vol. 5(2), pages 185-206, June.
    5. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, December.
    6. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 537-564.
    7. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June.
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    Citations

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    Cited by:

    1. Osharin, Alexander & Thisse, Jacques-François & Ushchev, Philip & Verbus, Valery, 2014. "Monopolistic competition and income dispersion," Economics Letters, Elsevier, vol. 122(2), pages 348-352.
    2. Nico Voigtländer & Hans-Joachim Voth, 2006. "Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution," Journal of Economic Growth, Springer, vol. 11(4), pages 319-361, December.
    3. Parenti, Mathieu & Ushchev, Philip & Thisse, Jacques-François, 2017. "Toward a theory of monopolistic competition," Journal of Economic Theory, Elsevier, vol. 167(C), pages 86-115.
    4. repec:nea:journl:y:2018:i:37:p:12-33 is not listed on IDEAS
    5. Berentsen Aleksander & Rocheteau Guillaume, 2003. "On the Friedman Rule in Search Models with Divisible Money," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-21, December.
    6. Foellmi, Reto & Wuergler, Tobias & Zweimüller, Josef, 2014. "The macroeconomics of Model T," Journal of Economic Theory, Elsevier, vol. 153(C), pages 617-647.
    7. Foellmi, Reto & Oechslin, Manuel, 2010. "Market imperfections, wealth inequality, and the distribution of trade gains," Journal of International Economics, Elsevier, vol. 81(1), pages 15-25, May.
    8. Nico Voigtländer & Joachim Voth, 2005. "Why England? Demand, growth and inequality during the Industrial Revolution," Economics Working Papers 857, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2006.
    9. Tarasov Alexander, 2009. "Income Distribution, Market Structure, and Individual Welfare," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-39, December.
    10. Schweinberger, A.G. & Woodland, A.D., 2015. "Entrepreneurship and conflict generating product price changes," European Economic Review, Elsevier, vol. 78(C), pages 158-174.
    11. Bruno S. Frey & Alois Stutzer, "undated". "Direct Democracy: Designing a Living Constitution," IEW - Working Papers 167, Institute for Empirical Research in Economics - University of Zurich.
    12. Boucekkine, Raouf & Latzer, Hélène & Parenti, Mathieu, 2017. "Variable markups in the long-run: A generalization of preferences in growth models," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 80-86.
    13. Aleksander Berentsen & Esther Br�gger & Simon L�rtscher, "undated". "On Cheating and Whistle-Blowing," IEW - Working Papers 153, Institute for Empirical Research in Economics - University of Zurich.
    14. Reto Foellmi & Josef Zweimüller, 2010. "Mass versus Exclusive Goods, and Formal-Sector Employment," Diskussionsschriften dp1005, Universitaet Bern, Departement Volkswirtschaft.
    15. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2007. "Calculating Tragedy: Assessing The Costs Of Terrorism," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 1-24, February.
    16. Castillo, Paul & Montoro, Carlos, 2015. "Distribución de Ingresos y Dolarización Endógena," Working Papers 2015-002, Banco Central de Reserva del Perú.
    17. repec:bla:stratm:v:39:y:2018:i:11:p:3006-3030 is not listed on IDEAS
    18. Enrico De Giorgi & Stefan Reimann, "undated". "The ?-Beauty Contest: Choosing Numbers, Thinking Intervals," IEW - Working Papers 183, Institute for Empirical Research in Economics - University of Zurich.
    19. Foellmi, Reto & Zweimüller, Josef, 2006. "Mass Consumption, Exclusion and Unemployment," CEPR Discussion Papers 5824, C.E.P.R. Discussion Papers.
    20. Wai Chiu Woo, 2016. "Quantity versus variety: Which aspect does status-seeking promote?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 63(2), pages 93-106, June.
    21. Jing‐Lin Duanmu & Maoliang Bu & Russell Pittman, 2018. "Does market competition dampen environmental performance? Evidence from China," Strategic Management Journal, Wiley Blackwell, vol. 39(11), pages 3006-3030, November.

    More about this item

    Keywords

    inequality; mark-ups; monopolistic competition;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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