Rising Market Power—A Threat to the Recovery?

The crisis has hit small and medium enterprises especially hard, causing massive job losses and other economic scars. Among these—less noticeable, but also serious—is rising market power among dominant firms as they emerge even stronger while smaller rivals fall away.

We know from experience and IMF research that excessive market power in the hands of a few firms can be a drag on medium-term growth, stifling innovation and holding back investment. Such an outcome could undermine the recovery from the COVID-19 crisis, and it would block the rise of many emerging firms at a time when their dynamism is desperately needed.

Creating a more level playing field is now more important than ever. And governments will need to achieve it across a wide range of sectors—from brewing through hospitals to digital.

New IMF research shows that key indicators of market power are on the rise—such as the markup of prices over marginal cost, or the concentration of revenues among the four biggest players in a sector. Due to the pandemic, we estimate that this concentration could now increase in advanced economies by at least as much as it did in the fifteen years to end of 2015. Even in those industries that benefited from the crisis, such as the digital sector, dominant players are among the biggest winners.

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Πηγή: blogs.imf.org

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