Entrepreneurship and conflict generating product price changesAlbert Schweinberger and Alan Woodland European Economic Review, 2015, vol. 78, issue C, 158-174 Abstract: This paper addresses the issue of the impact of changes in world prices upon the welfare of households in small open economies. Making use of a model of a small open economy with one monopolistically competitive industry, we derive conditions under which an exogenous increase in the world price of the monopolistically competitive good, arising from a shift in demand, is conflict generating between the owners of unskilled and skilled labour in the short run but Pareto improving in the long run. Output adjustments at the intensive margin make for conflict generation, but the converse holds for adjustments at the extensive margin in the long run. The analysis highlights the importance of the induced increase in the number of domestic varieties and of the skilled labour intensity in the production of goods relative to its intensity in the setting up of firms. Keywords: Entrepreneurship; Product price changes; Conflict generation between the owners of firms and workers; Monopolistic competition; Pareto improvements in welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:78:y:2015:i:c:p:158-174 DOI: 10.1016/j.euroecorev.2015.04.008 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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