Markups and Inequality

Corina Boar and Virgiliu Midrigan

No 25952, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study optimal product market interventions in an unequal economy in which firm ownership is concentrated and markups increase with firm market shares. We characterize optimal regulation in a static Mirrleesian setting in which we impose no constraints on the shape of interventions, and take into account their general equilibrium and distributional effects. We find that optimal regulation improves allocative efficiency, thereby increasing product market concentration. Though it leads to greater inequality, optimal regulation increases the equilibrium wage, benefiting most households. This result extends to a dynamic setting with capital and wealth accumulation.

JEL-codes: D4 E2 L1 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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Working Paper: Markups and Inequality (2019)
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