Economic Impact of Competition Policy: A Look Beyond Consumer Surplus

Competition authorities try to mitigate negative distortionary effects on the markets by tackling abuse of market power or cartels and by controlling mergers. This study attempts to assess the impact of these endeavours by going beyond calculations of lumpsum effects on consumer surplus. We revise the simulation of Van Sinderen and Kemp (Economist 156(4):365-385, 2008) who use a cut in income taxes as a modelling device to simulate the impact of anti cartel policies. Our approach avoids attributing effects caused purely by changes in taxation to market power and uses changes in the Lerner index as the impuls. We have updated the model to enable simulating the impact of competition policies on productivity and R&D in order to get a balanced view on the effects. We find that the re-distribution of surplus from producers to consumers supported by ACM in this new setting is likely to have a positive effect on productivity, GDP, wages and consumption, and a small positive effect on employment. This differs from the outcome of Van Sinderen and Kemp, who did not find a positive impact on productivity, due to an overestimation of the employment growth.