Distributional Effects of Competition : A Simulation Approach
Understanding the economic and social effects of the recent global trends of rising market concentration and market power has become a policy priority, particularly in developing countries where markets are often more concentrated. In this context,...
| Main Authors: | , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/889601556800454904/Distributional-Effects-of-Competition-A-Simulation-Approach http://hdl.handle.net/10986/31603 |
| Summary: | Understanding the economic and social
effects of the recent global trends of rising market
concentration and market power has become a policy priority,
particularly in developing countries where markets are often
more concentrated. In this context, since the poor are
typically the most affected by lack of competition, new
analytical tools to assess the distributional effects of
variations in market concentration in a rapid and
cost-efficient manner are required. To fill this knowledge
gap, this paper introduces a simple simulation method, the
Welfare and Competition tool (WELCOM), to estimate with
minimum data requirements the direct distributional effects
of market concentration through the price channel. Using
this simple yet novel tool, this paper also illustrates the
simulated distributional effects of reducing concentration
in two markets in Mexico that are known for their high level
of concentration: mobile telecommunications and corn
products. The results show that increasing competition from
four to 12 firms in the mobile telecommunications industry
and reducing the market share of the oligopoly in corn
products from 31.2 percent to 7.8 percent would achieve a
combined reduction of 0.8 percentage points in the poverty
headcount as well as a decline of 0.32 points in the Gini coefficient. |
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