Does imperfect competition foster capital accumulation in a developing economy

Pascal Belan, Philippe Michel and Bertrand Wigniolle ()
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Bertrand Wigniolle: EUREQua, http://eurequa.univ-paris1.fr

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

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 that 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)
JEL-codes: D43 D9 D64 (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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Persistent link: http://EconPapers.repec.org/RePEc:mse:wpsorb:v05026

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