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Market Imperfections and Income Distribution

Author

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  • Yılmaz Ensar

    (Department of Economics, Yildiz Technical University, Yildiz Besiktas, Istanbul 34349, Turkey)

Abstract
This paper aims to search links between market imperfections and functional income distribution. For this purpose we construct a two-sector model – wage goods and luxury goods producing sectors – incorporating imperfections of the product and labor markets under income inequality. In a structure with interdependent and partially monopolistic and competitive markets, we analytically trace up the effects of the changes in power relations proxied by the degree of mark-ups in the product and labor market. The model shows that price and wage mark-ups in two sectors have crucial income distribution implications for the agents in the economy to varying extents. It also demonstrates the effect of the existence of the differentiated consumption patterns arising from income inequality on income distribution. Furthermore, it seems that unemployment level creates externalities on wage rate and on corporate taxes of firms.

Suggested Citation

  • Yılmaz Ensar, 2016. "Market Imperfections and Income Distribution," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1147-1167, April.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:2:p:1147-1167:n:10
    DOI: 10.1515/bejeap-2015-0071
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    References listed on IDEAS

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    1. Hungerbühler, Mathias & Lehmann, Etienne, 2009. "On the optimality of a minimum wage: New insights from optimal tax theory," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 464-481, April.
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    Cited by:

    1. Ng, Yew-Kwang, 2018. "Ten rules for public economic policy," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 32-42.

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    More about this item

    Keywords

    market power; income distribution;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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