Competition and Inequality

Rajssa Mechelli and Andrea Colciago

No 914, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper links the debate on the decrease in competitiveness and busi- ness dynamism with that on rising inequality. We build a framework withentry, imperfect competition, heterogeneous households, and incompletemarkets. Recent trends in markups, factors’share, and business dynamismare explained through an increase in barriers to entry for new …rms, whichrestrict competition. Those trends account for 11% to 22% of the increasein income inequality observed between 1989 and 2007 and for 10% of the in-crease in wealth inequality. Just 16% of the population experiences a welfaregain during the transition from a high to a low competition environment.These are either the wealthy, or agents with low productivity relative totheir asset holdings.

Keywords: inequality; entry; oligopoly; markups; incomplete markets (search for similar items in EconPapers)
Date: 2020-07-02
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

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Working Paper: Competition and Inequality (2020)
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