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Distorted monopolistic competition

Behrens, Kristian, Mion, Giordano, Murata, Yasusada and Suedekum, Jens (2016) Distorted monopolistic competition. CEP discussion paper (CEPDP1457). Centre for Economic Performance (CEP), London, UK.

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Abstract

We characterize the equilibrium and optimal resource allocations in a general equilibrium model of monopolistic competition with multiple asymmetric sectors and heterogeneous firms. We first derive general results for additively separable preferences and general productivity distributions, and then analyze specific examples that allow for closed-form solutions and a simple quantification procedure. Using data for France and the United Kingdom, we find that the aggregate welfare distortion -- due to inefficient labour allocation and firm entry between sectors and inefficient selection and output within sectors -- is equivalent to the contribution of 6- 8% of the total labour input.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2016 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 26 Jan 2017 15:34
Last Modified: 17 Nov 2019 00:48
Projects: CEP Trade Programme
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/69034

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