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Monopolistic Competition in a Two-Sector Economy: The Relative Economies of Scale

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  • V. M. Goncharenko
  • A. B. Shapoval

Abstract

A model of a two-sector economy with monopolistic competition in the industrial sector and perfect competition in the standard sector is considered. The equilibrium of the model is found under the assumption that workers are mobile within their sectors, but cannot move from sector to sector. Consumers’ preferences are described by a general utility function. Then we investigate the relative scale effect: the response of macroeconomic variables such as demand, supply, prices and wages on changes in the employment structure between the sectors.

Suggested Citation

  • V. M. Goncharenko & A. B. Shapoval, 0. "Monopolistic Competition in a Two-Sector Economy: The Relative Economies of Scale," Economics of Contemporary Russia, Regional Public Organization for Assistance to the Development of Institutions of the Department of Economics of the Russian Academy of Sciences, issue 4.
    • Handle: RePEc:ack:journl:y::id:93
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