Aksoy, Yunus and Daripa, Arup and Samiri, Issam (2024) Firm ownership and macroeconomics of incentive leakages. Working Paper. National Institute of Economic and Social Research.
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Abstract
Questions about market power have become salient in macroeconomics. We consider the role of institutional structures in addressing these within a dynamic general equilibrium model. In standard models, monopoly profits are accounted for as a lump-sum payment to the representative agent. We label this an ``incentive leakage,'' and show this to be a general characteristic of firm-optimal arrangements. We show that structures such as shareholder-operated or worker-operated firms that eliminate the leakage can generate within-firm incentives that effectively reduce the monopoly distortion in equilibrium. When all firms operate similarly, an additional general equilibrium effect arises through the internalization of an aggregate demand externality. We characterize steady-state welfare across structures, and show how zero-leakage institutions lead to aggregate improvements towards the steady-state Golden Rule benchmark. Overall, our paper takes the first step towards an analysis of the macroeconomics of institutions without incentive leakage.
Metadata
| Item Type: | Monograph (Working Paper) |
|---|---|
| Additional Information: | NIESR Discussion Paper No. 563 |
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Research Centres and Institutes: | Applied Macroeconomics, Birkbeck Centre for |
| Depositing User: | Yunus Aksoy |
| Date Deposited: | 07 Jan 2025 12:55 |
| Last Modified: | 30 Mar 2025 11:32 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/54782 |
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