Inequality: A Hidden Cost of Market Power

Sean F Ennis, Pedro Gonzaga, Chris Pike, Inequality: A hidden cost of market power, Oxford Review of Economic Policy, Volume 35, Issue 3, Autumn 2019, Pages 518–549, Doi.org/10.1093/oxrep/grz017

38 Pages Posted: 29 Mar 2017 Last revised: 12 May 2022

See all articles by Sean F. Ennis

Sean F. Ennis

Centre for Competition Policy, University of East Anglia; Norwich Business School, University of East Anglia

Pedro Gonzaga

Organization for Economic Co-Operation and Development (OECD) - Competition Division

Chris Pike

University of East Anglia (UEA) - Centre for Competition Policy; Fideres Partners LLP

Date Written: April 25, 2019

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% by between 12% and 21% for a range of reasonable assumptions about savings behaviour, while it reduces the income of the poorest 20% by between 14% and 19%. The results contribute to the economic literature on the origins of inequality, suggesting that competition may help to reduce economic inequality.

Keywords: competition, inequality, market power, wealth distribution, income distribution

JEL Classification: D31, D42, D63

Suggested Citation

Ennis, Sean F. and Gonzaga, Pedro and Pike, Chris and Pike, Chris, Inequality: A Hidden Cost of Market Power (April 25, 2019). Sean F Ennis, Pedro Gonzaga, Chris Pike, Inequality: A hidden cost of market power, Oxford Review of Economic Policy, Volume 35, Issue 3, Autumn 2019, Pages 518–549, Doi.org/10.1093/oxrep/grz017 , Available at SSRN: https://ssrn.com/abstract=2942791 or http://dx.doi.org/10.2139/ssrn.2942791

Sean F. Ennis (Contact Author)

Centre for Competition Policy, University of East Anglia ( email )

United Kingdom
+44 (0)1603 591622 (Phone)

HOME PAGE: http://www.competitionpolicy.ac.uk

Norwich Business School, University of East Anglia ( email )

Norwich
NR4 7TJ
United Kingdom
+44 (0)1603 591622 (Phone)

Pedro Gonzaga

Organization for Economic Co-Operation and Development (OECD) - Competition Division ( email )

2, rue Andre Pascal
Paris Cedex 16, F-75775
France

Chris Pike

Fideres Partners LLP ( email )

University of East Anglia (UEA) - Centre for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

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