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Income Distribution, Price Elasticity and the ‘Robinson Effect’
Author(s) -
Benassi Corrado,
Chirco Alessandra
Publication year - 2004
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2004.00410.x
Subject(s) - economics , price elasticity of demand , wealth elasticity of demand , income elasticity of demand , imperfect competition , elasticity (physics) , price elasticity of supply , income distribution , imperfect , distributive property , microeconomics , inequality , mathematical analysis , linguistics , philosophy , materials science , mathematics , pure mathematics , composite material
In The Economics of Imperfect Competition , Joan Robinson argued that an increase of the consumers’ incomes should make demand less elastic—which, although reasonable about individual demand as an assumption on preferences, suggests a role for income distribution as far as market demand is concerned. We use Esteban's ( International Economic Review , Vol. 27 (1986), No. 2, pp. 439–444) income share elasticity to provide sufficient conditions on income distribution that support the ‘Robinson effect’—i.e. such that a negative (positive) relationship between individual income and price elasticity translates into a negative (positive) relationship between mean income and market demand elasticity. The paper also provides a framework to study the effects of distributive shocks on the price elasticity of market demand.