Distorted monopolistic competition

Kristian Behrens (), Giordano Mion, Yasusada Murata and Jens Suedekum

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: monopolistic competition; welfare distortion; intersectoral distortions; intrasectoral distortions (search for similar items in EconPapers)
JEL-codes: D43 D50 L13 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2016-12
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (18)

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http://eprints.lse.ac.uk/69034/ Open access version. (application/pdf)

Related works:
Working Paper: Distorted monopolistic competition (2016)
Working Paper: Distorted monopolistic competition (2016)
Working Paper: Distorted monopolistic competition (2016)
Working Paper: Distorted monopolistic competition (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:69034

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