Income distribution, market structure, and individual welfare

Alexander Tarasov

Munich Reprints in Economics from University of Munich, Department of Economics

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.

Date: 2009
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Income Distribution, Market Structure, and Individual Welfare (2009)
Working Paper: Income Distribution, Market Structure, and Individual Welfare (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:19578

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