Center Research Seminar. Speaker: Research Fellow Dmitry Pokrovsky

A report on «Market Size, Productivity and Entrepreneurship in a Model a'la Melitz» by Research Fellow of the TMSE D. Pokrovsky.

D. Pokrovsky

On May 7, 2012 a report on «Market Size, Productivity and Entrepreneurship in a Model a'la Melitz» by Research Fellow of MSSE D. Pokrovsky.

We develop a monopolistic-competition model of closed two-sector one-factor economy, where agents are (continuously) heterogeneous in their entrepreneurship abilities and choose between being employees or entrepreneurs. How the share of entrepreneurs in population changes when the market expands? The sufficient conditions in terms of variable elasticity of substitution are found for expanding or shrinking entrepreneurial sector. The changes in equilibrium consumptions, outputs, prices in the diversified sector are found for several important specifications of utility functions. In particular, special case of CES utility for varieties and Cobb-Douglas preference between the two sectors is the “neutral” borderline case between markets with increasing or decreasing productivity (and share of entrepreneurs) under market expansion.

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