We develop a model with three key features: a factor market distortion, monopoly power in the product market and indivisibilities in consumption. In this setting, multiple equilibria arise, one with high and the other with low equilibrium wages, incomes and output. It is also shown that even in a closed economy, growth may be immiserizing and, finally, that redistribution could be a "rich man's game".
All Science Journal Classification (ASJC) codes
- Economics and Econometrics