American Economic Review: Vol. 89 No. 5 (December 1999)


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Monopoly Rights: A Barrier to Riches

Article Citation

Parente, Stephen L., and Edward C. Prescott. 1999. "Monopoly Rights: A Barrier to Riches." American Economic Review, 89(5): 1216-1233.

DOI: 10.1257/aer.89.5.1216


Our thesis is that poor countries are poor because they employ arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently. In this paper, we analyze the consequences of one such arrangement. In each industry, the arrangement enables a coalition of factor suppliers to be the monopoly seller of its input services to all firms using a particular production process. We find that eliminating this monopoly arrangement could well increase output by roughly a factor of 3 without any increase in inputs.

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Parente, Stephen L. (U IL)
Prescott, Edward C. (U Chicago, U MN, and Federal Reserve Bank of Minneapolis)

JEL Classifications

O11: Macroeconomic Analyses of Economic Development
O14: Industrialization; Manufacturing and Service Industries; Choice of Technology
O33: Technological Change: Choices and Consequences; Diffusion Processes

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