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Market size, occupational self-selection, sorting, and income inequality
Journal of Regional Science. 2018. Vol. 58. No. 1. P. 38-62.
Behrens K., Pokrovsky D. A., Zhelobodko E.
We develop a monopolistic competition model with heterogeneous agents who self-select into occupations (entrepreneurs and workers) depending on innate ability. The effect of market size on the equilibrium occupational structure crucially hinges on properties of the lower tier utility function—its scale elasticity and relative love for-variety.When combined with the underlying ability distribution, the share of entrepreneurs and income inequality can increase or decrease with market size. When extended to allow for the endogenous sorting of mobile agents between cities, numerical examples suggest that sorting may increase inequality within and between cities.
Publication based on the results of:
Sharunova V., Aistov A., Kichko S. et al., Экономический журнал Высшей школы экономики 2015 Т. 19 № 2 С. 218-248
This paper studies how heterogeneous individuals, that differ by entrepreneurial skills
and productivity as a worker, endogenously choose their occupation (workers vs.
entrepreneurs) based on expected income comparison (wages vs. profits). Each entrepreneur runs a
firm that produces a single variety of a horizontally differentiated good under monopolistic
competition. We show that the cutoff for occupational selection between workers ...
Added: June 16, 2015
Pokrovsky D. A., Zhelobodko E. V., Behrens K., / Centre for Economic Policy Research. Series ISSN 0265-8003 "Centre for Economic Policy Research Discussion Paper Series". 2014. No. DP9831.
We develop a monopolistic competition model with two sectors and heterogeneous agents who self-select into entrepreneurship, depending on entrepreneurial ability. The effect of market size on the equilibrium share of entrepreneurs crucially hinges on properties of the lower-tier utility function for differentiated varieties – its elasticity of substitution and its Arrow-Pratt index of relative risk ...
Added: June 16, 2014
Osman O., Social Indicators Research 2021 P. 1-26
This paper is an empirical study that used econometric techniques to analyze the causal relationship between income inequality and financial disturbances in developed economies. The author used annual data from panels of OECD countries. In this study, income distribution is represented by the share of GDP that is accrued to the top 10 percent earners, ...
Added: July 12, 2021
Radionov S., Pospelov I. G., Mathematical Models and Computer Simulations 2014 Vol. 6 No. 5 P. 445-455
Based on the well-known model of monopolistic competition by Melitz with a finite number of firms, we built a number of dynamic models, designed to clarify the dynamic behavior of the original construction. Two variants of the formal Melitz dynamic model are presented, with the quasi-steady state found in one of them. Also, the models ...
Added: September 22, 2014
Lukyanova A., Oshchepkov A. Y., / EERC. Series "Labor markets and social policy". 2009. No. 09/02.
Although much research has been conducted on annual income inequality in Russia, little has been know about longer-run measures of income inequality and on income mobility. Using the data from the Russian Longitudinal Monitoring Survey, this paper investigates income mobility in Russia during the period of rapid economic growth. Employing a broad set of mobility ...
Added: October 29, 2012
Osharin A., Valery Verbus, Irina Bakunina et al., Journal of Economic Structures 2020 Vol. 9 P. 1-12
The paper develops a two-country monopolistic competition model of trade featuring country-specifc consumer tastes. The accounting for heterogeneity in tastes is achieved by assuming diferent elasticities of substitution in the CES utility function for diferent country consumers. The proposed framework extends the canonical Krugman’s approach by revealing new efects regarding markups response to consumer heterogeneity ...
Added: October 10, 2020
Kichko S., / Высшая школа экономики. Series WP BRP "Economics/EC". 2017.
We derive a simple necessary and sufficient condition on preferences for the market outcome to be socially optimal under monopolistic competition with input-output (IO) linkages. Preferences that satisfy this condition are typically non-CES and display pro-competitive effects, although they converge to the CES when IO linkages become negligibly weak. We show that the equilibrium with ...
Added: June 2, 2017
Osharin A., Verbus V. A., / EERC. Series "Labor markets and social policy". 2015. No. 15/03E.
The present paper extends the traditional Dixit and Stiglitz set-up by introducing consumers’ workers’ heterogeneity into a general equilibrium model of monopolistic competition. The model obtains a closed-form solution for a symmetric equilibrium and shows how the market outcome depends on the joint distribution of consumers’/workers’ taste and labor productivities. In contrast to the traditional ...
Added: March 8, 2016
Social Indicators Research 2020 P. 1-26
Abstract
This paper is an empirical study that used econometric techniques to analyze the causal relationship between income inequality and financial disturbances in developed economies. The author used annual data from panels of OECD countries. In this study, income distribution is represented by the share of GDP that accrued to the top 10 percent earners, wage ...
Added: November 18, 2020
Kichko S., Kokovin S. G., Zhelobodko E. V., / Austrian Institute of Economic Research, Vienna Institute for International Economic Studies, Computing Centre for Economics and Social Sciences. Series FIW "FIW Working Paper". 2013. No. 124.
We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firm profit and firm size may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, while both firms' size ...
Added: November 19, 2013
Kichko S., Spatial Economic Analysis 2018 Vol. 13 No. 4 P. 387-399
We develop an economic geography framework with positive trade costs in both manufacturing and traditional sectors, mobile skilled workers, and unequal shares of unskilled labour in regions. We show that partial agglomeration always features the home market effect (HME) regardless of whether regions trade only the manufacturing good or both. Moreover, spatial factor mobility is ...
Added: July 3, 2018
Zhelobodko E. V., Sidorov A., Thisse J., Журнал Новой экономической ассоциации 2013 № 19 С. 10-26
The paper studies a market of horizontally differentiated good under increasing return to scale and exogenous number of firms. Three concepts of equilibria are compared: Cournot, Bertrand and monopolistic competition. Under fairly general assumptions on consumer’s preferences, it is shown that Lerner index is the highest in Cournot case, monopolistic competition provides the lowest one ...
Added: November 14, 2013
A.Shapoval, V. M. Goncharenko, Journal of Economics 2020 Vol. 130 No. 2 P. 187-218
This paper offers a new theory that describes the influence of uncertainty on economic fundamentals. This theory posits that uncertainty can improve social welfare. We argue that in an economy, where spending of the customers for the differentiated good correlates with larger substitutability of its varieties, the equilibrium output decreases and the prices increase when uncertainty appears. Alternatively, if such ...
Added: March 2, 2020
Bykadorov I., / Economics Education and Research Consortium. Series "EERC Working Paper Series". 2010. No. 10/03E.
In Russia the chain-stores gained a considerable market power. In the paper we combine a Dixit-Stiglitz industry with a
monopolistic retailer. The questions addressed are: Does the retailer always deteriorate welfare, prices and variety of goods?
Which market structure is worse: Nash or Stackelberg behavior? What should be the public policy in this area? ...
Added: November 17, 2013
Anikin V. A., Lezhnina Y. P., Социологическое обозрение 2018 Т. 17 № 1 С. 237-273
The paper aims to deliver an extended review of both Russian and international studies that have contributed considerably to the income strati cation discourse. The very importance of the given research is justi ed by the lack of systematic studies in the field of the one-dimensional strati cation of the Russian society, although applied socio-economic research ...
Added: April 3, 2018
Shapoval S., Гончаренко В. М., Пространственная экономика 2014 № 3 С. 12-25
The article deals with the theory of monopolistic competition under demand uncertainty. The authors consider the economy with labor immobility consisting of the high-tech sector with monopolistic competition and the standard sector with perfect competition. Preferences between sectors are specified by the Cobb – Douglas production function. It is assumed that companies make output
decisions under ...
Added: January 16, 2015
Behrens K., Murata Y., Journal of International Economics 2012 No. 87 P. 1-17
We present a general equilibrium model of monopolistic competition featuring pro-competitive effects and a competitive limit, and investigate the impact of trade on welfare and efficiency. Contrary to the constant elasticity case, in which all gains from trade are due to product diversity, our model allows for a welfare decomposition between gains from product diversity ...
Added: November 23, 2013
Dabrowski M., Russian Journal of Economics 2018 Vol. 4 No. 3 P. 266-284
The last decade brought increasing attention to income and wealth inequalities in advanced economies because of their increase in several countries and negative social and political implications. However, this debate is often limited to the single-country perspective, disregarding decreasing global income inequalities, i.e. inequalities between individuals in the entire world. This paper focuses mainly on ...
Added: October 10, 2018
Kichko S., Behrens K., Ushchev P., / CESifo Group Munich. Series "CESifo working paper". 2018. No. WP6965.
We develop a general equilibrium model of monopolistic competition with a traded and a nontraded sector. Using a broad class of homothetic preferences—that generate variable markups, display a simple behavior of their elasticity of substitution, and nest the ces as a limiting case— we show that trade liberalization: (i) reduces domestic markups and increases imported ...
Added: April 26, 2018
Shapoval S., V.M. Goncharenko, / The Economics Education and Research Consortium. Series WP 14/02E "A. Enterprises and product markets". 2014. No. 14/02E.
Inspired by advances in general equilibrium modelling with monopolistic competition were-consider the problem of the choice of firms under uncertainty, explore it in the framework of general equilibrium modelling, and develop a theory of monopolistic competition under demand uncertainty. We distinguish between two cases of uncertainty. In the first case the uncertainty disappears by the ...
Added: September 28, 2016
Kichko S., Picard P., / Высшая школа экономики. Series WP BRP "Economics/EC". 2020. No. 239.
This paper studies the e¤ects of consumer income heterogeneity on monopolistically competitive product markets and individual welfare in the context of non-homothetic pref- erences. When expenditure of richer individuals is less sensitive to price change compared to poorer ones, a mean-preserving contraction of income distribution makes firm revenue less sensitive to price changes. This entices ...
Added: March 24, 2021
Kichko S., Economics Letters 2017 Vol. 158 P. 58-61
We derive a simple necessary and sufficient condition on preferences for the market outcome to be socially optimal under monopolistic competition with input-output (IO) linkages. Preferences that satisfy this condition are typically non-CES and display pro-competitive effects, although they converge to the CES when IO linkages become negligibly weak. We show that the equilibrium with ...
Added: June 17, 2017
Alexander Osharin, Advances in Economics and Business 2013 Vol. 1 No. 2 P. 145-149
The paper investigates distributional effects and market structure in a one-sector model of monopolistic competition with heterogeneous consumers. By using the CES utility function depending on consumer’s personal income the paper shows how the equilibrium prices, firm size and number of firms depend upon income distribution and intensity of competition. The proposed model extends the ...
Added: November 13, 2013
Pokrovsky D. A., Пространственная экономика 2014 № 2 С. 9-39
This paper is addressed to explanation of differentiation of economics in structure of labor market and income distribution. In order to this aim the author develops a model of endogenous formation of entrepreneurship in economics with heterogeneous agents. The nature of heterogeneity is non-trivial distribution of entrepreneurial abilities across individuals. The impact of form and ...
Added: June 16, 2014