Corporate Transformation, Income Inequality, and Consumer Commodity Choice: The Economic Cycle in the Rise and Fall of Industries

Abstract

In a multi-industry closed economy with constant productivity, this paper innovatively constructs an inter-industry transformation mechanism, and find the clustering behavior of enterprises transforming according to the industry prosperity will lead to the inter-industry evolution, which will lead to the fluctuation of the business cycle. We also find that the extreme boom/bust of a single industry will greatly increase the degree of income inequality, and when the industrial pattern composed of the development of different industries is in a balanced state, income inequality is at the lowest point of the economic cycle; At the same time, on the demand side of economic operation, we apply the heterogeneous commodity selection theory of utility maximization in classical economics to the household sector with two consumption preferences (high-grade and ordinary) for the first time, and finds that the implementation of diversified commodity basket subsidies for households in need of relief will promote the improvement of total social utility. This is the strong false evidence of the utilitarian view of social welfare; Finally, we study the government's attitude towards enterprise transformation, allowing the government to adjust the industrial structure of the economy by imposing macro-restrictions on the minimum number of companies in a single industry. It finds that enterprise transformation under excessive restrictions will lead to the failure of the market mechanism, making it impossible to rationally allocate production resources among industries, resulting in low GDP and low social utility. The extremely loose transformation supervision will have a profit impact on the high-end goods industry.