Poverty, Competition, Democracy and Ownership: a General Equilibrium Model with Vertical Preferences *

Amani Kahloul, Rim Lahmandi-Ayed and Hejer Lasram

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Abstract: We consider a general equilibrium model where individuals are at the same time workers, consumers and shareholders, with two possible ownership structures: egalitarian where all individuals share equally the firm's (firms') capital and concentrated where the owners of the firm(s) are negligible w.r.t the total population; and two possible market structures: Monopoly and Duopoly. The questions are, whether more competition generates more or less poverty for a given ownership structure; and whether a democratic choice between Monopoly and Duopoly leads to the alternative with less poverty. We consider four poverty indicators based respectively on Per Capita Income (PCI), Income Floor, Poorest and Income-Poor Population Size. When the ownership is concentrated, we show that Duopoly generates less poverty than Monopoly and that democratic choice between the two alternatives alleviates poverty according to all indicators apart from PCI. When the ownership is egalitarian, Duopoly may generate more or less poverty than Monopoly and democratic choice alleviates poverty regarding at least one poverty indicator and worsens poverty regarding at least another one, the four poverty indicators never converging. An empirical study on the effect of competition on poverty supports to some extent our theoretical findings. JEL Classification: I32, J4, L13. * We are grateful to Didier Laussel for his careful reading of a previous draft and his very helpful suggestions, and to Hafedh Bouakez for his interesting comments. Remaining imperfections are only ours.

Keywords: Vertical differentiation; general equilibrium; poverty; democracy; competition; ownership structure (search for similar items in EconPapers)
Date: 2018-10-10
New Economics Papers: this item is included in nep-bec and nep-com
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Journal Article: Poverty, competition, democracy, and ownership: A general equilibrium model with vertical preferences (2019)
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