Monopoly Rights: A Barrier to Riches

Our thesis is that poor countries are poor because they employ arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently.In this paper, we analyze the consequences of one such arrangement.In each industry, the arrangement enables a coalition of factor suppliers to be the monopoly seller of its input services to all firms using a particular production process.We find that eliminating this monopoly arrangement could well increase output by roughly a factor of 3 without any increase in inputs.*The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.