The Application of Monopolistic Competition in Macroeconomics

• Main Authors: Hong-Yu Lin, 林鴻裕
• Other Authors: Chun-Tien Hu
• Format: Others
• Language: zh-TW
• Published: 1999
• Online Access: http://ndltd.ncl.edu.tw/handle/41536824806212297772

博士 === 國立中興大學 === 經濟學系 === 87 === The development of macroeconomic theory is moving to the direction to have a closer relationship with microeconomic theory. On the other hand, the opinion of perfect market structure seems to come apart with the operation of the real world economic society. In 1977, the mathematics model of monopolistic competition introduced by Dixit and Stiglitz had cased macroeconomic theory go to the world of general equilibrium approach with imperfect competition. When we examined the process of the building general equilibrium model with imperfect competition, we found the truth that the control and ownership have been separated in modern economics is being ignored. In stead, the assumption that firms are pursuing profit maximization was made. To make the theory be more realistic, a macroeconomic model with concepts of manager-controlled firm theory and bargaining power used in microeconomic theory is developed to evaluate the multiplier effect and analyze the social welfare. The multiplier effect and social welfare are totally dependent upon the decentralization of total voting stock. The more decentralized the total voting stock, the weaker the multiplier effect and the higher the social welfare; and the more centralized the total voting stock, the stronger the multiplier effect and the lower the social welfare. The situation of pursuing maximum profit is similar to the situation of a very centralized total voting stock, therefore, unless the economic society in the real world is centralized, otherwise, the multiplier effect and distorted market will be overestimated. A more detailed discussion is in chapter two of this thesis. Since social welfare is so related with how decentralized the total voting stock, that once resource allocation does not reach Pareto optimal, the government dose not necessary have to take discretionary policies, but alternatively the government can decentralize the total voting stock to interfere the economy. Monopolistic competition market structure can be applied not only in the closed economy, but also applied on open economy to review some important issues in this field starting from the 1990. In chapter three, we attempted to include monopolistic competition market structure into open economies with a special discussion on applying the theory on currency crisis (or sometimes called exchange rate regime collapse). Because the existing discussions of currency crisis usually neglected the supply-side influence, we included monopolistic competition market structure into the discussion of currency crisis. The neglecting of supply-side economy made it difficult to observe the economic impact on the real aspect of a small country when currency crisis happened on that small country. In chapter three in this thesis, we discussed monopolistic competition market structure on small open economic entities to resolve the problem of not displaying the real changes on the real aspect economic activity. The following phenomena has been found: when a small country encountered currency crisis, the output and employment will increase before the currency crisis and the output and employment will decrease after the currency crisis unless the utility function of representative individual is of the special model of additive separability.