IMF: How to Keep Corporate Power in Check

The overarching policy goal should be to ensure a level playing field among all companies

 
People are becoming concerned that the rising power of big successful companies may be behind some of the recent sluggish economic growth and rising income inequality.

Are these concerns justified? Our research in Chapter 2 of the April World Economic Outlook looks at this question using data for nearly 1 million companies from 27 advanced and emerging market economies since the early 2000s.

We find that rising corporate market power has had a fairly limited negative economic impact so far. But, if left unchecked, it could take a bigger toll on growth and people’s incomes in the future. Policymakers need different policies to keep market competition strong.

 
Rise in market power

While market power is often associated with rising concentration and the surge of corporate giants in industries like pharmaceuticals or high-tech, a better indicator is the so-called price markup—how much a company charges for its products compared with how much it costs to produce, expressed as a ratio. By this metric, we find that firms’ average markup has increased, although moderately—by close to 8 percent in advanced economies since 2000, but by less than 2 percent in those emerging economies covered by the analysis.

How to Keep Corporate Power in Check

Πηγή: blogs.imf.org