Abstract
Wealth accumulation is a deterministic factor mechanism of national economic growth. Neoclassical growth theory is basically concerned with capital and wealth accumulation in perfectly competitive market. Global markets are characterized by a great variety of markets. Nevertheless, there only a few rigorous models of wealth accumulation with other types of markets within neoclassical growth framework. This study attempts to contribute literature of economic growth by introducing monopolistic competition and monopoly into neoclassical growth theory. The model is based on a few well-established economic theories. The model is constructed within framework of the Solow-Uzawa two-sector neoclassical growth model. The description of to monopolistic competition is influenced by the Dixit-Stiglitz model of monopolistic competition. The modelling of monopoly is based on monopoly theory. We model behavior of the household with Zhang’s utility function and concepts of current income and disposable income. The unique contribution of this research is to integrate these theories in a comprehensive framework. We construct the basic model and then analyze properties of the model. The existence of a unique equilibrium point is identified by simulation. The effects of changes in some parameters comparative static analyses in some parameters.
Highlights
In modern economies different market structures co-exist
As far as I am aware, this is a first macroeconomic growth model of endogenous capital and wealth with monopoly, monopolistic competition, and perfect competition based on microeconomic foundation
As far as capital and wealth accumulation is concerned, neoclassical growth theory is perhaps only a successful economic theory built on microeconomic foundation
Summary
In modern economies different market structures co-exist. In one national economy, one observes perfect competition, imperfect competition, oligopoly, and monopoly. Economists built a few formal growth models with microeconomic foundation which analyze behavior of different market structures in an integrated theory. This study contributes to the literature of neoclassical economic growth theory with capital and wealth accumulation by integrating different market structures within a single comprehensive framework. As far as capital and wealth accumulation is concerned, neoclassical growth theory is perhaps only a successful economic theory built on microeconomic foundation. This study applies the general economic theory to examine another important economic problem - how to analyze different market structures within an integrated framework with the growth mechanism of neoclassical growth theory. This study is to develop Zhang’s model by introducing monopoly and economic structure into growth theory with wealth and capital accumulation.
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