Market Structure, Distribution and Growth

Abstract

This paper analyzes the relationship between market structure, income distribution and economic growth in a neo-Keynesian growth model. The microeconomic determination of prices is distinguished from the macroeconomic determination of the rate of return on capital. Two conclusions which depend on this distinction are, first, that an increase in the degree of monopoly (expansion of the oligopolyzed sector) may reduce the rate of growth and reduce the rate of return on capital in the competitive sector, and second, that there may be a significant dispute on income distribution between oligopoly and competitive firms, rather than between wages and capital.