Effect of Increased Competition on the PS Curve, Equilibrium, and Income Distribution
When firms face greater market competition, their ability to set high profit markups is reduced. This decrease in the markup causes the price-setting (PS) curve to shift upward, resulting in a higher real wage. The economy moves to a new equilibrium (e.g., point B in the WS-PS model) characterized by lower structural unemployment. This shift also alters income distribution, reducing the profit share of output and increasing the wage share, which leads to lower overall inequality.
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Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
Introduction to Macroeconomics Course
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Effect of Increased Competition on the PS Curve, Equilibrium, and Income Distribution
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