Income Distribution, Search and Market Efficiency

Simhon Avi () and Fishman Arthur ()
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Simhon Avi: The Hebrew University of Jerusalem
Fishman Arthur: Bar-Ilan University

The B.E. Journal of Economic Analysis & Policy, 2011, vol. 11, issue 1, 23

Abstract: This paper explores the relationship between income distribution, prices, production efficiency and aggregate output in a decentralized search economy. We show that income distribution determines how competitive prices are and thereby affects production efficiency and aggregate output. It is shown that, under reasonable assumptions, it is possible to engineer a judicious transfer of income from high to low income individuals, which increases income equality, leads to more competitive prices, and increases aggregate output.

Keywords: search; price dispersion; income distribution; inequality (search for similar items in EconPapers)
Date: 2011
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DOI: 10.2202/1935-1682.2174

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