Inequality: A hidden cost of market power

Some policies drive growth, others act to redistribute income or wealth. While competition has long been known to drive economic growth, it can also make an important contribution to reducing income and wealth inequality.

This OECD paper develops a new model to illustrate how higher profits from market power, and associated higher prices, could influence the distribution of wealth and income through the analysis of data from eight OECD countries – Canada, France, Germany, Korea, Japan, Spain, the United Kingdom and the United States.

It suggests that market power and higher prices increase the wealth of the richest 10 per cent of the population in eight OECD countries by between 12% and 21%, while at the same time reducing the disposable income of the poorest 20 per cent by between 14% and 19%.

Download the paper: Inequality: a hidden cost of market power

See the article: The effects of market power on inequality, CPI Journal Fall 2017