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Discussion Paper Details

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Title: Monopoly Rights can Reduce Income Big Time

Author(s): Berthold Herrendorf and Arilton Teixeira

Publication Date: April 2003

Keyword(s): capital accumulation, monopoly rights, technology adoption, total factor productivity and vasted interests

Programme Area(s): International Macroeconomics

Abstract: We study a two?sector version of the neoclassical growth model with coalitions of factor suppliers in the capital producing sectors. We show that if the coalitions have monopoly rights, then they block the adoption of the efficient technology. We also show that blocking leads to a decrease in the productivity of each capital producing sector and to an increase in the relative price of capital; as a result capital stock and production fall in each sector. We finally show that the implied fall in the level of per capita income can be large quantitatively.

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Bibliographic Reference

Herrendorf, B and Teixeira, A. 2003. 'Monopoly Rights can Reduce Income Big Time'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3854