Inequality: A hidden cost of market power

Sean Ennis, Pedro Gonzaga, Chris Pike

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)
7 Downloads (Pure)

Abstract

This paper explores the impact of competition on inequality by developing a new model to illustrate how higher profits from market power, and associated higher prices, could influence the distribution of wealth and income. We analyse data from eight OECD countries—Canada, France, Germany, Korea, Japan, Spain, the United Kingdom, and the United States. In an average country in the sample, market power increases the wealth of the richest 10 per cent by between 12 and 21 per cent for a range of reasonable assumptions about savings behaviour, while it reduces the income of the poorest 20 per cent by 11 per cent or more. The results contribute to the economic literature on the origins of inequality, suggesting that lack of competition may be one source of economic inequality.
Original languageEnglish
Pages (from-to)518-549
Number of pages32
JournalOxford Review of Economic Policy
Volume35
Issue number3
Early online date11 Jul 2019
DOIs
Publication statusPublished - Sep 2019

Keywords

  • inequality
  • income distribution
  • wealth distribution
  • market power
  • competition

Cite this