IMF cautions against concentration of market power

The International Monetary Fund (IMF) in a report released Wednesday cautioned against an ongoing trend in which market power has increasingly concentrated among "a small fraction of dynamic firms."

In one of the analytical chapters of the IMF's updated World Economic Outlook report, the full version of which is expected to be published on April 9, the international lender analyzed the rise of corporate market power and its macroeconomic effects.

The research found out that market power has increased moderately across advanced economies, but not in emerging market economies. For companies in advanced economies, the report said, price markups over marginal costs have risen by close to 8 percent since 2000.

Despite the fact that the increase has been fairly widespread across advanced economies and industries, "within them, it has been concentrated among a small fraction of dynamic – more productive and innovative – firms," the IMF said in the report.

In addition, further increases in the market power of these already-powerful firms, according to the report, could weaken investment, deter innovation, reduce labor income shares, and make it more difficult for monetary policy to stabilize output.

The study noted that rising corporate market power so far seems more reflective of a "winner-takes-most" by more productive and innovative firms than of weaker pro-competition policies. It suggested that policymakers heed the phenomenon's "challenging macro macroeconomic implications" and engage in reforms that keep future market competition strong.

Addressing an event at the U.S. Chamber of Commerce on Tuesday, IMF Managing Director Christine Lagarde said the winner-takes-most dynamic is "especially pronounced in the digital economy."

"I am not saying that we currently have a 'monopoly problem,'" Lagarde said. "But I am saying that we should take appropriate measures-so that it does not become a problem."

To cope with the issue, the IMF chief called for actions on reducing barriers to entry for new firms and reforming competition frameworks to ensure a level playing field in all sectors, whether traditional or high-tech.

(CGTN)