Monopoly rights: a barrier to riches

Stephen Parente () and Edward Prescott

No 236, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Our thesis is that poor countries are poor because they employee arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently. In this paper, we analyze the consequences of one such arrangement. In each industry, the arrangement enables a coalition of factor suppliers to be the monopoly seller of its input services to all firms using a particular production process. We find that the inefficiencies associated with this monopoly arrangement can be large. Whereas other studies have found that inefficiencies induced by monopoly are at most a few percent of output, we find that eliminating this monopoly arrangement could well increase output by roughly a factor of 3 without any increase in inputs.

Keywords: Wealth (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (10)

Published in American Economic Review (Vol. 89, No. 5, December 1999, pp. 1216-33)

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Journal Article: Monopoly Rights: A Barrier to Riches (1999)
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