Market restrictions and economic growth

Abstract

This paper introduces endogenous growth into a standard two-sector model to study the growth effect of changes in organization of markets. We find that when the rents from land expand to keep pace with the growth of output, it is possible that in the long run an economy in which land is not traded grows faster than a fully competitive economy; and an economy in which neither land nor labour markets are competitive and the share of output given to labour is high enough attains the fastest growth. Otherwise, restrictions on the land market retard long-run growth.