Income distribution, search and market efficiency

Avi Simhon, Arthur Fishman

Research output: Contribution to journalArticlepeer-review

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 languageEnglish
Article number8
JournalB.E. Journal of Economic Analysis and Policy
Volume11
Issue number1
DOIs
StatePublished - 2011

Keywords

  • income distribution
  • inequality
  • price dispersion
  • search

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