Monopoly, human capital accumulation and development

Monopoly is an important barrier to development for it restricts the mobili ty of workers. This gives rise to specificity problem and consequently weak ens workers' incentives to invest in human capital. In a two-sector general equilibrium model calibrated to the facts about the labor market, I find t hat in the long run, GDP can rise by about 2.6 times if these distortions a re removed even if the monopoly markup and the degree of specificity are se t at modest levels. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: O10; J24; J42; L12.