The Welfare Cost of Imperfect Competition and Distortionary Taxation

Arbeitspapier

The welfare cost of imperfect competition in the product and labor market as well as distortionary taxation is quantified in a dynamic general equilibrium model parameterized to fit the U.S. economy. We find that the welfare cost of imperfect competition in the product market is 35.74 percent while it is 0.66 percent in the labor market, taking the transition from the distorted to the optimal steady state into account. If we also take into account that the U.S. economy is characterized by distortionary taxation the welfare cost in the product market increases to 48.26 percent and 4.70 percent in the labor market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 170

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: General ; Taxation, Subsidies, and Revenue: General ; Market Structure, Firm Strategy, and Market Performance: General
• Subject: monopolistic competition ; distortionary taxation ; welfare

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jonsson, Magnus
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/82399
• Last update: 10.03.2025, 11:43 AM CET