IDEAS home Printed from https://ideas.repec.org/p/ide/wpaper/1447.html
   My bibliography  Save this paper

Distribution and Growth in an Economy with Limited Needs

Author

Listed:
  • Saint-Paul, Gilles

Abstract

This paper studies a model of the distribution of income under bounded needs. Utility derived from any given good reaches a bliss point at a finite consumption level of that good. On the other hand, introducing new varieties always increases utility. It is assumed that each variety is owned by a monopoly. Workers can specialize in material goods production or in the knowledge sector, which designs new varieties. It is shown that if the elasticity of labor supply to the knowledge sector is bounded, as productivity increases, the economy moves from a “Solovian zone” where wages increase with productivity, to a “Marxian” zone where the paradoxically decline with productivity. This is because as consumption of a given good increases, the price elasticity of demand falls, and markups increase to infinity as consumption reaches the unit elasticity point. Such a point typically exists because of the finiteness of needs. It is also shown that if individual creativity is more unevenly distributed then productivity, technical progress always increases inequality. Redistribution from profits to workers in the production sector always benefits arbitrarily poor workers regardless of their distortionary effect on the number of varieties, because diversity is not valued by very poor agents. In contrast, rich agents close enough to their bliss point can only be made better-off by an increase in diversity. If wages are set by monopoly unions rather than set competitively, they are proportional to productivity and the Marxian zone no longer exists. But technical progress always reduces employment in the material goods sector. International trade may reduce wages in poor countries and increase them in rich countries if under autarky the former consume less of each good that the latter.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IDEI Working Papers 125, Institut d'Économie Industrielle (IDEI), Toulouse.
  • Handle: RePEc:ide:wpaper:1447
    as

    Download full text from publisher

    File URL: http://idei.fr/sites/default/files/medias/doc/by/saint_paul/marx1.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Weitzman, Martin L, 1985. "The Simple Macroeconomics of Profit Sharing," American Economic Review, American Economic Association, vol. 75(5), pages 937-953, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zeira, Joseph, 2005. "Machines as Engines of Growth," CEPR Discussion Papers 5429, C.E.P.R. Discussion Papers.
    2. Saint-Paul, Gilles, 2004. "Are intellectual property rights unfair?," Labour Economics, Elsevier, vol. 11(1), pages 129-144, February.
    3. Foellmi, Reto & Zweimuller, Josef, 2004. "Inequality, market power, and product diversity," Economics Letters, Elsevier, vol. 82(1), pages 139-145, January.
    4. Volker Grossmann, 2003. "A Note on Redistributive Taxation, Labor Supply, and National Income," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(1), pages 39-48, April.
    5. Reto Foellmi & Josef Zweimuller, 2006. "Income Distribution and Demand-Induced Innovations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 941-960.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:bofrdp:1997_008 is not listed on IDEAS
    2. Sarah Brown & Lisa Farrell & Mark N. Harris & John G. Sessions, 2006. "Risk preference and employment contract type," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 169(4), pages 849-863, October.
    3. Reizer, Balázs, 2022. "Employment and Wage Consequences of Flexible Wage Components," Labour Economics, Elsevier, vol. 78(C).
    4. Koskela, Erkki & Stenbacka, Rune, 2001. "Equilibrium unemployment with credit and labour market imperfections," Bank of Finland Research Discussion Papers 5/2001, Bank of Finland.
    5. Goerke, Laszlo, 2013. "Profit sharing and relative consumption," Economics Letters, Elsevier, vol. 118(1), pages 167-169.
    6. Mauro Mastrogiacomo & Rob Euwals & Raun van Ooijen, 2010. "Private wealth and planned early retirement: A panel data analysis for the Netherlands 1994-2009," CPB Discussion Paper 160.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Michaelis, Jochen, 1997. "On the equivalence of profit and revenue sharing," Economics Letters, Elsevier, vol. 57(1), pages 113-118, November.
    8. Morton, Peter J., 1998. "Annual bonuses, employment and productivity change in Taiwan's manufacturing sector," Journal of Economic Behavior & Organization, Elsevier, vol. 37(4), pages 481-507, December.
    9. Duca, John V. & VanHoose, David D., 1998. "Goods-market competition and profit sharing: a multisector macro approach," Journal of Economics and Business, Elsevier, vol. 50(6), pages 525-534, November.
    10. Dhillon, Amrita & Petrakis, Emmanuel, 2001. "Profit-sharing, bertrand competition and monopoly unions : a note," The Warwick Economics Research Paper Series (TWERPS) 612, University of Warwick, Department of Economics.
    11. Juan Carlos Bárcena-Ruiz, 2016. "Employee share ownership in a unionised duopoly," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(3), pages 173-195, December.
    12. Jaylson Jair da Silveira & Gilberto Tadeu Lima, 2017. "Employee Profit-sharing and Labor Extraction in a Classical Model of Distribution and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 29(4), pages 613-635, October.
    13. Giorgio Gomel & Angelo Cicogna & Domenico De Falco & Marco Valerio Della Penna & Lorenzo Di Bona De Sarzana & Angela Di Maria & Patrizia Di Natale & Alessandra Freni & Sergio Masciantonio & Giacomo Od, 2010. "Islamic finance and conventional financial systems. Market trends, supervisory perspectives and implications for central banking activity," Questioni di Economia e Finanza (Occasional Papers) 73, Bank of Italy, Economic Research and International Relations Area.
    14. Telegdy, Álmos, 2018. "Public wage spillovers: The role of individual characteristics and employer wage policies," Labour Economics, Elsevier, vol. 55(C), pages 116-129.
    15. Benassy, Jean-Pascal, 1987. "The Objective Demand Curve in General Equilibrium with Price Makers," Economic Journal, Royal Economic Society, vol. 98(390), pages 37-49, Supplemen.
    16. Koskela, Erkki & Stenbacka, Rune, 2003. "Equilibrium Unemployment Under Negotiated Profit Sharing," IZA Discussion Papers 840, Institute of Labor Economics (IZA).
    17. Harbaugh, Rick, 2005. "The effect of employee stock ownership on wage and employment bargaining," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 565-583, September.
    18. Kirstein, Roland & Kirstein, Annette, 2004. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," CSLE Discussion Paper Series 2004-09, Saarland University, CSLE - Center for the Study of Law and Economics.
    19. Gaetano Cuomo, 2015. "Imprese cooperative e democrazia economica," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2015(116), pages 5-38.
    20. Cable, John R. & Wilson, Nicholas, 1988. "Profit-Sharing And Productivity: An Analysis Of Uk Engineering Firms," Economic Research Papers 268335, University of Warwick - Department of Economics.
    21. Gilberto Tadeu Lima & Jaylson Jair da Silveira, 2018. "Macrodynamic Implications of Employee Profit Sharing as Effort Elicitation Device," Working Papers, Department of Economics 2018_02, University of São Paulo (FEA-USP).

    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O - Economic Development, Innovation, Technological Change, and Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ide:wpaper:1447. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/idtlsfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.