Abstract
This paper explores the relationship between income distribution, prices, production efficiency and aggregate output in a decentralized search economy. We show that income distribution determines how competitive prices are and thereby affects production efficiency and aggregate output. It is shown that, under reasonable assumptions, it is possible to engineer a judicious transfer of income from high to low income individuals, which increases income equality, leads to more competitive prices, and increases aggregate output.
| Original language | English |
|---|---|
| Article number | 8 |
| Journal | B.E. Journal of Economic Analysis and Policy |
| Volume | 11 |
| Issue number | 1 |
| DOIs | |
| State | Published - 2011 |
Keywords
- income distribution
- inequality
- price dispersion
- search
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
