Does imperfect competition foster capital accumulation in a developing economy ?

Pascal Belan, Philippe Michel and Bertrand Wigniolle ()
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Bertrand Wigniolle: EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - CNRS : UMR8594 - Université Panthéon-Sorbonne - Paris I

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

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 which allows the economy to reach the unconstrained regime, and is welfare-enhancing for workers.

Keywords: Imperfect competition; capital accumulation; altruism. (search for similar items in EconPapers)
Date: 2005-03
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Related works:
Working Paper: Does imperfect competition foster capital accumulation in a developing economy ? (2005)
Working Paper: Does imperfect competition foster capital accumulation in a developing economy (2005)
Journal Article: Does imperfect competition foster capital accumulation in a developing economy? (2005)
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