Chapter 24. Market Structure in Multisector General Equilibrium Models of Open Economies

We provide an overview of several approaches to modeling market structure in multisector general equilibrium (MSGE) models, including both oligopoly and monopolistic competition. We emphasize open economy models and applications to international economic policy. We map out practical strategies for implementing variations on market structure, including functional forms and calibration strategies. We also identify areas that, in our view, are promising for further research. This includes both exploring the implications of moving away from average cost pricing models (including monopolistic competition) for labor market outcomes and inequality, and better methods for econometric estimation of parameters and confronting alternative forms of market structure against measures of model performance (specification testing).