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Cross‐ownership, business dynamism, and wage inequality in general equilibrium

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  • Hamid Beladi
  • Chi‐Chur Chao
  • Kuo‐Hsuan Chin

Abstract

This study examines the distributive and welfare effects of cross‐ownership by firms in a general equilibrium economy on the product and factor markets. The cross‐ownership of equities, such as collusion, tends to be anticompetitive, thereby narrowing the wage gap between skilled and unskilled labor in the short term with the existing number of firms. In the capital market, reducing capital cost through cross‐ownership causes new firms to enter the market in the long term. This firm‐entry effect induced by cross‐ownership through an increase in the number of competitors generates a competitive force that exacerbates wage inequality and reduces welfare in the economy.

Suggested Citation

  • Hamid Beladi & Chi‐Chur Chao & Kuo‐Hsuan Chin, 2024. "Cross‐ownership, business dynamism, and wage inequality in general equilibrium," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(4), pages 570-587, September.
    • Handle: RePEc:bla:scotjp:v:71:y:2024:i:4:p:570-587
    DOI: 10.1111/sjpe.12380
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    References listed on IDEAS

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