Macroeconomic Effects of Market Structure Distortions: Evidence from French Cartels
IMF Working Papers, May 27, 2022
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- Macroeconomic Effects of Market Structure Distortions: Evidence from French Cartels
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Bibliographic details
- Authors: Flavien Moreau, Ludovic Panon
- Published: May 27, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400210686.001
Summary and empirical scope
- Authors: Flavien Moreau, Ludovic Panon
- Date: May 27, 2022
- Core contribution: Systematic evidence on cartels’ characteristics using novel data on cases investigated by the French Competition Authority.
- Key empirical observations:
- Cartels are widely spread across sectors.
- Cartel members are typically among the top firms in their industries.
Theoretical framework and mechanism
- Model features:
- Heterogeneous firms and collusion.
- Collusion leads to supracompetitive markups.
- Mechanism:
- Cartels amplify misallocation across firms by sustaining higher-than-competitive markups, reducing aggregate efficiency.
Quantitative findings and macroeconomic impact
- Aggregate effects of breaking down French cartels:
- Increase in aggregate productivity: 2%
- Increase in welfare: 3.5%
- Economy moves 37% closer to the efficient frontier
- Interpretation: These magnitudes illustrate the aggregate importance of collusion through its impact on productivity, welfare, and distance to the efficient frontier.
Subject areas and keywords
- Subject: Competition, Demand elasticity, Economic theory, Financial markets, Inflation, Prices, Production, Productivity, Total factor productivity
- Keywords: cartel member, cartels, characteristics of cartel, collusion, Competition, Demand elasticity, Europe, Global, Inflation, market structure distortion, markup dispersion, misallocation, Productivity, systematic evidence, Total factor productivity, welfare
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- Working Paper