Does market power affect economic growth?

Posted by Dietrich Vollrath on January 22, 2009 · 3 mins read

There is accumulating evidence that the market power of firms - as proxied by their profits or the markup they charge over marginal cost - has risen over the last 15 or 30 years. While some market power may be necessary to create incentives for innovation, it is possible that there is “too much” market power and that this is limiting growth. At the same time, market power affects how we measure economic growth, and so the effect of rising market power isn’t immediately obvious.

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