Monopolistic Competition and Optimum Product Diversity under Firm Heterogeneity
By Swati Dhingra, John Morrow. Journal of Political Economy, 2019
243 citations recorded by the source corpus.
Empirical work has drawn attention to the high degree of productivity differences within industries and their role in resource allocation. This paper examines the allocational efficiency of such markets. Productivity differences introduce two new margins of potential inefficiency: selection of the right distribution of firms and allocation of the right quantities across firms. We show that these considerations affect welfare and policy analysis, and market power across firms leads to distortions in resource allocation. Demand-side elasticities determine how resources are misallocated and when increased competition from market expansion provides welfare gains.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/1c04288b28675628e5861b7b01ec72da167f78fb
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In Economics and Econometrics
- Thomas Sampson
- John Van Reenen
- Swati Dhingra
- Gianmarco I. P. Ottaviano
- David J. Donaldson
- Arnaud Costinot
- J. Pessoa
- Hanwei Huang
Citations in the corpus
- The costs and benefits of leaving the EU: trade effects (2017, background): “Bilateral exports are hampered by higher exporter wage (larger wi) and greater importer proximity to trading partners (larger Φj) as this gives the (3)In models of monopolistic competition,Dhingra and Morrow (2012) show that CES demand, that we use in this paper, provides a lower bound for the gains”
- Not So Demanding: Demand Structure and Firm Behavior (2017, unknown): “Furthermore, we use our approach to derive new results for the case of heterogeneous firms, as in Melitz (2003), extended to general demands, as in Zhelobodko et al. (2012), Bertoletti and Epifani (2014) and Dhingra and Morrow (2016).”
- Nonparametric Counterfactual Predictions in Neoclassical Models of International Trade (2017, background): “…1 relies on the efficiency of the competitive equilibrium, we expect a version of the previous result to hold under alternative market structures provided that the decentralized equilibria are Pareto efficient, like under monopolistic competition with CES utility; see Dhingra and Morrow (2016).”