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Modelling Complementarity in Monopolistic Competition

Discussion Paper 81 | Published May 1, 1993

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Author

Kiminori Matsuyama

Modelling Complementarity in Monopolistic Competition

Abstract

In recent years, monopolistic competition models have frequently been applied in macroeconomics, international and interregional economics, and economic growth and development. In this paper, I present a highly selective review in this area, with special emphasis on the complementarity and its role of generating multiplier processes, agglomeration, underdevelopment traps, regional disparities, and sustainable growth, or more generally, what Myrdal (1957) called the “principle of circular and cumulative causation.”