This paper links the debate on the decrease in competitiveness and business dynamism with that on rising inequality. We build a framework with entry, imperfect competition, heterogeneous households, and incomplete markets. Recent trends in markups, factorsíshare, and business dynamism are explained through an increase in barriers to entry for new Örms, which restrict competition. Those trends account for 11% to 22% of the increase in income inequality observed between 1989 and 2007 and for 10% of the increase in wealth inequality. Just 16% of the population experiences a welfare gain during the transition from a high to a low competition environment. These are either the wealthy, or agents with low productivity relative to their asset holdings

Colciago, A., Mechelli, R. (2020). Competition and Inequality [Working paper].

Competition and Inequality

Andrea Colciago;
Primo
;
Rajssa Mechelli
Secondo
2020

Abstract

This paper links the debate on the decrease in competitiveness and business dynamism with that on rising inequality. We build a framework with entry, imperfect competition, heterogeneous households, and incomplete markets. Recent trends in markups, factorsíshare, and business dynamism are explained through an increase in barriers to entry for new Örms, which restrict competition. Those trends account for 11% to 22% of the increase in income inequality observed between 1989 and 2007 and for 10% of the increase in wealth inequality. Just 16% of the population experiences a welfare gain during the transition from a high to a low competition environment. These are either the wealthy, or agents with low productivity relative to their asset holdings
Working paper
University of Oxford, Department of Economics Discussion Paper Series
inequality, entry, oligopoly, markups, incomplete markets
English
2020
2020
Number 914 July, 2020
1
45
https://ora.ox.ac.uk/objects/uuid:b290a4f5-d21d-45a1-96c1-a6c567138f3e
Colciago, A., Mechelli, R. (2020). Competition and Inequality [Working paper].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/413280
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