Fed paper: market power can cause inequality and instability

US Fed

The growing market power of firms in product and labour markets can explain an array of undesirable trends, from inequality to financial instability, new research published by the Federal Reserve finds.

Inspired by work on “class struggle” by Michał Kalecki in the 1970s, authors Isabel Cairó and Jae Sim develop a real business cycle model in which two types of agents – capitalists and workers – interact in a monopolistic setting.

Cairó and Sim say their model can account for six recent

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