Engines of Liberation: The Impact of Technological Progress in an Imperfect Competition Setting

We present some evidence from the U.S. Census about the market concentration in the home appliances sector (e.g., four-firm concentration ratio and Herfindahl-Hirshman index) which suggests that competition in this sector, rather than being perfect, is better described by an oligopoly structure. We develop a general equilibrium three-sector growth model (home, market, appliances) where the price of home appliances is endogenous and firms in the appliances sector interact strategically. We assess the qualitative importance of technological progress at home and in the market for the decline in the relative price of home appliances. Due to the presence imperfectly competitive markets, the price of home appliances declines relative to the market wage even when total factor productivity at home and in the market grow at the same rate. Finally, we calibrate our model to match key facts of the economy in 1900. We analyze the quantitative impact of changes in the relative price of home appliances on women’s employment and the appliances adoption decisions under the following two (opposite) scenarios. First, technology at home and in the market grow at a common rate equal to the historical average value of total factor productivity. Second, technology at home grow at a faster rate. In the first case, our model captures slightly less than half of the decline in the appliance price and slightly more than half of the increase in employment rate of married women. JEL code: O15, J22