1. The Poverty Effects of Market Concentration
- Author
-
Rodríguez-Castelán, Carlos
- Subjects
INVESTMENT ,MARKET POWER ,MARKET COMPETITION ,TAX ,MARGINAL PRODUCT ,DEVELOPING COUNTRY ,EQUILIBRIUM ANALYSIS ,ENTRY BARRIERS ,MEASUREMENT ,PRICE EFFECT ,DEMAND FUNCTION ,DEMAND FUNCTIONS ,CONSUMER PRICES ,RETAILING ,MARKET ENTRY ,SUBSTITUTE ,WELFARE ANALYSIS ,OLIGOPOLISTIC MARKET ,INCOME ,OUTCOMES ,PRODUCTIVITY ,PERFECT COMPETITION ,ECONOMIC STRUCTURES ,GOVERNMENT POLICY ,COMPETITION POLICY ,INCENTIVES ,POVERTY ,OPTIONS ,SHARES ,DISTRIBUTION ,GOODS ,UTILITY MAXIMIZATION ,TAX COLLECTION ,MARGINAL COST ,MODELS ,DEVELOPMENT ECONOMICS ,INCOME EFFECTS ,MARKETS ,PROFIT ,SURPLUSES ,GENERAL EQUILIBRIUM ANALYSIS ,MARKET STRUCTURE ,FINANCE ,RETAIL STORES ,FAILURES ,PRICES ,WAGES ,CONSUMER GROUPS ,PROFIT MAXIMIZATION ,WELFARE ,LABOR MARKET ,INCOME INEQUALITY ,OFFSETS ,CONSUMPTION ,MARKET YIELDS ,LOWER PRICES ,PRICING ,MARKET CONCENTRATION ,THEORY ,DEVELOPMENT POLICY ,FUNCTIONAL FORMS ,GUARANTEES ,TRADE ,HOMOGENEOUS GOOD ,POLICY IMPLICATIONS ,EQUILIBRIUM ,MARKET ,SUPPLY ,PROPERTY ,COMPETITIVE MARKETS ,TRADE CREDIT ,OWNERSHIP ,WEALTH ,DEMAND ,CONSUMERS ,INVESTMENT CLIMATE ,MONOPOLISTIC MARKET ,SURPLUS ,PRODUCT ,UTILITY FUNCTION ,INDUSTRIAL ECONOMICS ,PARTIAL EQUILIBRIUM ANALYSIS ,DEMOCRATIC PROCESSES ,POLITICAL ECONOMY ,PUBLIC FUNDS ,EXCHANGE ,TAXATION ,INCOME TAX ,UTILITY ,VALUE ,POSITIVE EFFECTS ,AGGREGATE DEMAND ,BARRIERS TO ENTRY ,MONOPOLY ,POLICY ,CONSUMER SURPLUS ,MARKET CONCENTRATIONS ,GOOD ,INCOME EFFECT ,REVENUE ,RETAILING INDUSTRY ,ECONOMIC POLICIES ,PRICE ,COST OF LIVING ,TAXES ,EQUITY ,HOUSEHOLD INCOME ,ECONOMY ,INEFFICIENCY ,COMPETITION ,PROFITS ,CREDIT ,NOMINAL INCOME ,COMMODITY PRICES ,DEVELOPING COUNTRIES ,INTERNATIONAL BANK ,COMPETITIVE MARKET ,MONETARY FUND ,MARKET FAILURES ,GLOBALIZATION ,PRICE STRUCTURE ,DEVELOPMENT BANK ,EXOGENOUS INCOME ,PRODUCT QUALITY ,OLIGOPOLY ,REVENUES ,RETAIL ,TAX POLICIES ,SHARE ,ECONOMIC RESEARCH ,EXPENDITURE - Abstract
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.
- Published
- 2015