Monopolistic competition, the Dixit–Stiglitz model, and economic analysis
In: Research in economics: Ricerche economiche, Volume 71, Issue 4, p. 798-802
ISSN: 1090-9451
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In: Research in economics: Ricerche economiche, Volume 71, Issue 4, p. 798-802
ISSN: 1090-9451
Purpose: This paper is to analyze dynamic interactions between economic growth, capital and wealth accumulation, change in welfare, leisure time, inflation, and inflation policy, and government bond in an economy with monopolistic and perfect competition. It aims to integrate various economic mechanisms in different theories in a comprehensive framework to provide some new theoretical insights into complex of economic interactions with microeconomic foundation. Methodology: The work is a theoretical macroeconomic growth model, synthesizing a few influential mathematical models in modern macroeconomics. The growth mechanism and perfect competition are built on the Solow one-sector growth model. Money and growth with inflation are influenced by the Tobin growth model with money. The modeling of monopolistic competition follows the Dixit-Stiglitz approach. Our approach is also closely related to the IS-LM model and the AD-AS model. Findings: We build the model and simulate it to show behavior of the economic structural change. The system contains a unique equilibrium point. We describe the movement of the economy by simulation. We show the consequences of exogenous shifts in some parameters on the economic development in short-term transition. Implications: We find how monetary variables interact with real variables, whose connections cannot be explained by traditional models within a single framework. It also shows that the government inflation may have positive economic effects in short term, but uncertain consequences in the long term. The uncertainty is due to instabilities of the monetary economy. Originality: This paper makes an original contribution to the literature of growth theory with money by synthesizing some well-known models in a comprehensive analytical framework. The dynamic interactions between variables cannot be explained in the traditional separated approaches.
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In: Tokyo Center for Economic Research (TCER) Paper No. E122
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In: Higher School of Economics Research Paper No. WP BRP 34/EC/2013
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In: Global social sciences review: an open access, triple-blind peer review, multidisciplinary journal, Volume V, Issue II, p. 312-326
ISSN: 2616-793X
The purpose of this study is to deal with dynamic interdependence between economic growth, economic structure, and residential distribution. It develops a spatial dynamic economic model on basis of microeconomic foundation. It integrates the economic mechanisms of the Solow one-sector growth model, the Alonso spatial residential model, and the Dixit-Stiglitz equilibrium model with imperfect market. We apply neoclassical economic growth of perfect competition to describe the growth determinant, the neoclassical urban residential model to determine residential location, and the basic model of new growth theory with imperfect market to take account of perfect and imperfect competition in spatial equilibrium structure. The basic economic mechanisms of the three approaches are integrated by using Zhang new approach to formally model household behavior. We determine the motion by simulation. Then we conduct comparative dynamic analysis to analyze how exogenous changes in different parameters affect residential distribution, economic growth, and economic structure. The study shows how changes in preferences and technologies affect economic growth, economic structure, land rent, and residential distribution.
The author studies the determination of trade policy by considering an imperfectly competitive market. The model adopts the political process developed by Grossman and Helpman (1994), but it also takes into account a different economic structure, which is based on the Footloose Capital model. Two new appealing insights come from the consideration of monopolistic competition. Firstly, in this setting, the interest group seems to be more worried to persuade the government to set a high tariff when it can charge a low mark-up. Secondly, the initial distribution of industry might also influence the structure of protection in one economy. ; La autora estudia la determinación de la política comercial en un marco de competencia imperfecta. El modelo incorpora el proceso político desarrollado por Grossman and Helpman (1994), teniendo en cuenta una estructura económica diferente, basada en el modelo Footloose Capital. Dos nuevas predicciones surgen al considerar competencia imperfecta. En primer lugar, en este marco, un lobby parece estar más preocupado en persuadir al gobierno de aplicar un arancel elevado cuando puede cargar al precio un bajo mark-up. En segundo lugar, la distribución inicial de la firma puede influir en la estructura de protección en una economía.
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The author studies the determination of trade policy by considering an imperfectly competitive market. The model adopts the political process developed by Grossman and Helpman (1994), but it also takes into account a different economic structure, which is based on the Footloose Capital model. Two new appealing insights come from the consideration of monopolistic competition. Firstly, in this setting, the interest group seems to be more worried to persuade the government to set a high tariff when it can charge a low mark-up. Secondly, the initial distribution of industry might also influence the structure of protection in one economy. ; La autora estudia la determinación de la política comercial en un marco de competencia imperfecta. El modelo incorpora el proceso político desarrollado por Grossman and Helpman (1994), teniendo en cuenta una estructura económica diferente, basada en el modelo Footloose Capital. Dos nuevas predicciones surgen al considerar competencia imperfecta. En primer lugar, en este marco, un lobby parece estar más preocupado en persuadir al gobierno de aplicar un arancel elevado cuando puede cargar al precio un bajo mark-up. En segundo lugar, la distribución inicial de la firma puede influir en la estructura de protección en una economía.
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AbstractThe author studies the determination of trade policy by considering an imperfect competitive market. The model adopts the political process developed by Grossman and Helpman (1994), but it also takes into account a different economic structure, which is based on the Footloose Capital model. Two new appealing insights come from the consideration of monopolistic competition. Firstly, in this setting the interest group seems to be more worried to persuade the government to set a high tariff when it can charge a low mark-up. Secondly, the initial distribution of industry might also influence the structure of protection in one economy.Keywords: Endogenous trade policy; Monopolistic competition; Trade; Economic geography.JEL classification: F12, F13, R30.Protección Endógena en una estructura de mercado de competencia monopolística à la Dixit-StiglitzResumenLa autora estudia la determinación de la política comercial en un marco de competencia imperfecta. El modelo incorpora el proceso político desarrollado por Grossman and Helpman (1994), teniendo en cuenta una estructura económica diferente, basada en el modelo Footloose Capital. Dos nuevas predicciones surgen al considerar competencia imperfecta. En primer lugar, en este marco, un lobby parece estar más preocupado en persuadir al gobierno de aplicar un arancel elevado cuando puede cargar al precio un bajo mark-up. En segundo lugar, la distribución inicial de la firma puede influir en la estructura de protección en una economía.Palabras claves: Política comercial endógena; Competencia monopolística; Comercio; Geografía económica.Clasificación JEL: F12, F13, R30.
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In: Revista de economía y estadística, Volume 52, Issue 1, p. 87-112
ISSN: 2451-7321
The author studies the determination of trade policy by considering an imperfectly competitive market. The model adopts the political process developed by Grossman and Helpman (1994), but it also takes into account a different economic structure, which is based on the Footloose Capital model. Two new appealing insights come from the consideration of monopolistic competition. Firstly, in this setting, the interest group seems to be more worried to persuade the government to set a high tariff when it can charge a low mark-up. Secondly, the initial distribution of industry might also influence the structure of protection in one economy.
In 2000s, Russian large retailers captured a large share of the market and obtained a significant market power. This change in the market organization may enhance or deteriorate social welfare. Public interest in this issue stimulated adoption by the Russian Parliament (State Duma) of the law against the concentration of trade in the hands of a few firms. In this paper we consider the question of efficiency, in terms of social welfare, this kind of state intervention in the relations between retailers and manufacturers. ; С начала XXI в. российские крупные торговые сети захватили большую долю рынка и получили значительную рыночную силу. Такое изменение рыночной организации может приводить и к выгоде, и к ущербу для общественного благосостояния. Общественный интерес к этому вопросу подтолкнул принятие Государственной Думой РФ закона против концентрации торговли в руках немногих фирм. В данной работе мы теоретически рассматриваем вопрос об эффективности, с точки зрения общественного благосостояния, подобного рода вмешательства государства во взаимоотношения ритейлеров и производителей.
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In: Research in economics: Ricerche economiche, Volume 71, Issue 4, p. 729-739
ISSN: 1090-9451
This paper broadens the protection for sale model of Grossman and Helpman (1994) by incorporating the Krugman–Dixit–Stiglitz model of monopolistic competition, given its importance in explaining the prevalence of intraindustry trade. Several new results arise in this paper. First, the endogenous import tariff will never fall below zero, even in unorganized sectors. Second, the endogenous export policy for organized sectors is not necessarily an export subsidy, and can be an export tax as in unorganized sectors. Third, the level of import protection varies inversely with the degree of import penetration, regardless of whether the sector is organized or not.
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In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Volume 42, Issue 4, p. 1347-1360
ISSN: 1540-5982
Abstract In the Dixit‐Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that workers' rents also contribute to explain excess entry through a general equilibrium mechanism. Larger wages indeed raises the aggregate earnings and firms sales and profits, which entices too many firms to enter. We discuss the possibility of over‐provision of varieties by comparing the equilibrium to unconstrained and constrained social optima and to other regulatory frameworks where wages are not controlled.
In: Journal of benefit-cost analysis: JBCA, Volume 3, Issue 1, p. 1-27
ISSN: 2152-2812
The debate about the effectiveness of investments in public infrastructure initiated by Aschauer suggests that there may be substantial discrepancies between the results of conventional cost-benefit analysis and the ultimate effects of such investments on welfare. This paper takes a closer look at this issue by investigating the existence of secondary or indirect effects under conditions of monopolistic competition. We find that such effects will in general exist, and that they are potentially large, but that they can also be negative, depending on the specification of the model. With linear demand curves, indirect effects can be positive, zero or negative, with Dixit-Stiglitz they are always nonnegative and closely related to the taste for diversity, while with the logit model they are always identically zero. Free entry reinforces the positive indirect effects in the Dixit-Stiglitz model, and causes negative indirect effects in the logit model. Given this variety of results, robust empirical measurement of the indirect effects appears to be difficult.