The Effect of Monopoly Power on National Income, Wage Income and Interest Rates

Edward M. Miller

American Journal of Economics and Sociology, 1978, vol. 37, issue 4, 349-358

Abstract: Abstract. That part of business profits due to monopoly power or other forms of imperfect competition is capitalized into stock prices.Common stock is part of gross wealth, and as such provides a store of value for consumers against emergencies. A very simple graphical model is developed to show how interest rates, gross wealth holdings, and holdings of physical capital are jointly determined. In turn the levels of national income, property income, and wage income are determined once the stock of physical capital and the interest rate are known. In essence, capitalized monopoly profits substitute for physical capital, reducing the economy's stock of capital goods. Similar effects are produced by government debt.

Date: 1978
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