The Poverty Effects of Market Concentration
This paper contributes to the limited literature on the welfare impacts of market concentration by developing a simple model that shows how exogenous variations in market power affect poverty. Increased market power leads to economy-wide welfare lo...
| Main Author: | |
|---|---|
| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/12/25672296/poverty-effects-market-concentration http://hdl.handle.net/10986/23479 |
| Summary: | This paper contributes to the limited
literature on the welfare impacts of market concentration by
developing a simple model that shows how exogenous
variations in market power affect poverty. Increased market
power leads to economy-wide welfare losses, because it
raises the prices of goods and services for all agents in an
economy and thus reduces the relative incomes of households,
particularly among the poor. Declines in poverty in this
context are only possible in the case wherein the poor have
access to a share of oligopolistic rents. Although this
scenario seems highly unlikely, this result has important
implications for public policy, particularly for economies
with less-than-perfect markets and social objectives of
poverty eradication. This result suggest the possibility of
taxing extranormal rents extracted by firms with market
power and redistributing them through targeted lump-sum
social transfers, thereby contributing to poverty reduction
by mitigating welfare losses from the negative price effect. |
|---|