Macroeconomic Effects of Market Structure Distortions: Evidence from French Cartels

May 27, 2022

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We provide systematic evidence on cartels’ characteristics, using novel data on cases investigated by the French Competition Authority. These practices are widely spread across sectors and cartel members are typically among the top firms in their industries. In a model with heterogeneous firms and collusion, cartels amplify misallocation by charging supracompetitive markups. Breaking down French cartels would increase aggregate productivity by 2%, welfare by 3.5%, bringing the economy 37% closer to the efficient frontier. These numbers shed light on the aggregate importance of collusion.

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

Pages:
85
Volume:
2022
DOI:
https://doi.org/10.5089/9798400210686.001
Issue:
104
Series:
Working Paper No. 2022/104
Stock No:
WPIEA2022104
ISBN:
9798400210686
ISSN:
1018-5941

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