Research on measuring and evaluating Corporate Power

In an IMF blog contribution, an approach to evaluate Corporate Power is suggested. Generally, the authors

 

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.

 

The authors suggest to use the so called price-markup, the price difference between what a company charges over the actual production costs as an indicator of market power.

The authors highlight the following development:

Since the early 2000s, rising markups have contributed to some reduction in companies’ investment—a key ingredient to sustained growth. As a company’s market power increases, it can widen its profits by charging a higher price and reducing its output. This, in turn, leads the company to reduce its demand for capital and, therefore, its investment.

Read more at the IMF blog