Competition Law and Income Inequality: A Panel Data Econometric Approach

39 Pages Posted: 15 Nov 2020 Last revised: 24 May 2021

See all articles by Amit Zac

Amit Zac

ETH Zürich; University of Amsterdam - University of Amsterdam Faculty of Law

Carola Casti

University of Oxford

Christopher Decker

University of Oxford

Ariel Ezrachi

University of Oxford - Faculty of Law

Date Written: May 21, 2021

Abstract

It is widely assumed that competition law can affect income inequality. However, scarce ‎empirical evidence supports such a presumption, and little is known about how competition ‎law and inequality are linked (the transmission mechanism). To address this gap, we ‎develop a conceptual framework that links competition law, competition intensity and ‎inequality. We apply this framework to model changes in multiple competition law indices ‎and inequality metrics for a large sample of countries over the period 1960–2010. We find ‎strong empirical support linking competition law and perceived competition intensity ‎which, on the assumption that more intense competition reduces inequality, implies that ‎effective competition law should also be associated with lower inequality. Our subsequent ‎analysis of changes in various competition law indices and inequality metrics is less ‎conclusive. While a negative correlation is observed in the statistics, the relationship is only ‎robust for a small number of inequality measures and competition law indices. On balance, ‎although the results do not conclusively support the presumption of a link between ‎competition law and inequality, they are nevertheless suggestive. To fully understand the ‎relationship we recommend that further analysis is needed which tests more precise ‎transmission mechanisms at different scales (industry, specific markets).‎

Keywords: Income Inequality, Antitrust, Panel Data, Economic Development‎

JEL Classification: I32, L40, O4, C33 ‎

Suggested Citation

Zac, Amit and Casti, Carola and Decker, Christopher and Ezrachi, Ariel, Competition Law and Income Inequality: A Panel Data Econometric Approach (May 21, 2021). Available at SSRN: https://ssrn.com/abstract=3402436 or http://dx.doi.org/10.2139/ssrn.3402436

Amit Zac (Contact Author)

ETH Zürich ( email )

LEE G104
Leonhardstrasse 21
Zurich
Switzerland

HOME PAGE: http://https://lawecon.ethz.ch/group/scientific-team/zac.html

University of Amsterdam - University of Amsterdam Faculty of Law ( email )

Postbus 15654
1001 ND
Amsterdam, Noord-Holland 1001 ND
Netherlands

Carola Casti

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Christopher Decker

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, Oxfordshire OX1 3UQ
United Kingdom

Ariel Ezrachi

University of Oxford - Faculty of Law ( email )

Oxford
United Kingdom

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