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Distributional comparative statics with heterogeneous agents


Hefti, Andreas (2016). Distributional comparative statics with heterogeneous agents. Working paper series / Department of Economics 237, University of Zurich.

Abstract

We propose a formal way to systematically study the differential effects of exogenous shocks in economic models with heterogeneous agents. Our setting applies to models that can be rephrased as "competition for market shares" in a broad sense. We show that even in presence of any number of arbitrarily heterogeneous agents, a single recursion relation characterizes the distributional pattern of equilibrium market shares and related measures. We identify the general conditions under which the market share function rotates, thereby either causing more or less equality among the agents. Our setting highlights the exceptional rule that power functions play for the distributional effects. We apply our method across economic models, including examples from monopolistic competition, discrete choice, partial and general equilibrium theory and contest theory.

Abstract

We propose a formal way to systematically study the differential effects of exogenous shocks in economic models with heterogeneous agents. Our setting applies to models that can be rephrased as "competition for market shares" in a broad sense. We show that even in presence of any number of arbitrarily heterogeneous agents, a single recursion relation characterizes the distributional pattern of equilibrium market shares and related measures. We identify the general conditions under which the market share function rotates, thereby either causing more or less equality among the agents. Our setting highlights the exceptional rule that power functions play for the distributional effects. We apply our method across economic models, including examples from monopolistic competition, discrete choice, partial and general equilibrium theory and contest theory.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D72, D82, C73, C62, C65
Uncontrolled Keywords:Heterogeneity, inequality, monopolistic competition, general equilibrium, contest theory
Language:English
Date:November 2016
Deposited On:23 Nov 2016 15:20
Last Modified:29 Aug 2017 11:22
Series Name:Working paper series / Department of Economics
Number of Pages:56
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp237.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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