Income Distribution, Market Structure, and Individual Welfare

Alexander Tarasov

The B.E. Journal of Theoretical Economics, 2009, vol. 9, issue 1, 39

Abstract: This paper explores how income distribution affects market structure, prices, and economic well-being of different consumer groups. I consider a general equilibrium model of monopolistic competition with free entry, heterogenous firms and consumers that share identical but non-homothetic preferences. The results in the paper suggest that poverty reduction might be of a greater importance than lowering income inequality, as lower income inequality does not necessarily lead to welfare gains of the poor. In particular, I show that higher income inequality may benefit the poor via a trickle-down effect operating through the entry of firms into the market.

Keywords: non-homothetic preferences; income inequality; free entry (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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Working Paper: Income distribution, market structure, and individual welfare (2009)
Working Paper: Income Distribution, Market Structure, and Individual Welfare (2008)
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DOI: 10.2202/1935-1704.1586

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