Does increasing concentration hit poorer areas more? A study of retail petroleum markets (with Ormosi P.L., Bokhari F.A.S., and Ennis S.) (resubmitted revise and resubmit with Journal of Industrial Economics). Available at SSRN 3877256.
A central tenet in the field of industrial organisation is that increasing/decreasing market concentration is associated with increased/reduced markups. But does this variation affect every consumer to the same extent? Previous literature finds price dispersion exists even for homogeneous goods, at least partially as a result of heterogeneity in consumer engagement with the market. We study this question by linking demographic and income heterogeneity across local areas to the impact of changing market concentration on markups. With 15 years of station-level motor fuel price data from Western Australia and information on instances of local market exit and entry, we apply a non-parametric causal forest approach to explore the heterogeneity in the effect of exit/entry. The paper provides evidence of the distributional effect of changing market concentration. Areas with lower income experience a larger increase in petrol stations' price margin as a result of market exit. On the other hand, entry does not benefit the same low-income areas with a larger reduction in the margin than in high-income areas. Policy implications include a need to further focus on increasing engagement by low-income consumers.
Antibacterial resistance and the cost of affecting demand: the case of UK antibiotics (with Bokhari F.A.S, Weijie Z.) (conditional acceptance with International Journal of Industrial Organization). Available at CCP 19-03.
Consumption of broad-spectrum antibiotics is associated with rising antimicrobial resistance (AMR) levels. The use of broad-spectrum drugs, particularly of cephalosporins, quinolones, and co-amoxiclav contributes the most to the rise in AMR. We use aggregate sales data on antibiotics from the UK to estimate structural demand models and reveal drug substitution patterns. We then simulate alternative tax schemes to evaluate the effectiveness of shifting demand from broad- to narrow-spectrum drugs. Our estimates suggest that these policies can be highly effective in demand management and come at a relatively low cost regarding changes in consumer and producer surplus.
Digital platform mergers and innovation: Evidence from the cloud computing market (with Doan T.) Available at CCP 23-05.
This paper empirically analyses mergers and innovation in the cloud computing market, one of the fastest-growing digital markets. We first examine mergers by big tech firms and venture capital funding for young start-ups in this market. We find that leading firms in the market tend to acquire young start-ups, whereas non-leading firms tend to purchase more established firms to gain market share. We then conduct an ex-post evaluation of how mergers in this market affect the innovation output - measured by patents. The results show a positive impact of mergers on innovation. In this market, and our measure of innovation, acquisitions do not necessarily harm innovation. The breakdown of this empirical analysis reveals stronger positive effects when the firm holds a leadership position in the market, operates as a multisided platform, or when the target is a publicly traded company. The value of the acquisition does not exert any additional impact.
The effects of taxation on differentiated products markets (with Bennato A) Available at CCP 23-06.
In this study, we analyse the impact of differentiated and homogeneous ad valorem tax rates on two product qualities within imperfectly competitive markets. Our focus is on the tax's application to product quality and its implications for prices and welfare. We find that with a symmetric tax rate increase, net prices diverge when the tax is quality-differentiated and converge when it is uniform across qualities. Competition mitigates these effects, promoting convergence under differentiation and divergence under homogeneity. A differentiated tax system generates higher tax revenues and producer rents, but reduces consumer surplus, highlighting the trade-offs inherent in tax policy.
Unintended distributional impacts: Concentration, and competition policy (with Carr J. and Davies S.W.) Original short paper CCP 22-01.
This paper contributes to the empirical landscape regarding the distributional impact of competition and competition policy. Employing a unique blend of data from the national survey of household expenditure and the UK business structure database, it uncovers three noteworthy findings. Firstly, it reveals that individuals with lower income levels tend to rely more heavily on product purchases and services from markets characterised by higher concentration, compared to their wealthier counterparts. Secondly, it identifies a significant negative correlation across products and services, linking the income elasticity of demand to the concentration of the industries that supply them. Thirdly, the paper sheds light on the impact of regulation and competition enforcement by competition agencies. Specifically, it demonstrates that regulated sectors or markets subject to competition enforcement measures have experienced reduced concentration, particularly benefiting consumers with lower incomes.
Residential Choices and Social Interactions: Exploring Slum Formation in Nineteenth and Twentieth-Century Dublin (with Berger S.K. and Bokhari F.A.S.) Available upon request.
This article expands upon the theory of social interactions, utilizing a distinctive longitudinal historical dataset that encompasses houses and residents to explain the formation of tenement slums in Dublin during the nineteenth and early twentieth centuries. With an empirical three-stage nonparametric methodology, we gain insight into why some neighborhoods became slums while other similar areas did not. Our results indicate that the wealthier residents of Dublin were willing to pay more to live in neighborhoods with fewer tenements than the less wealthy groups. The discrepancy in preferences across types promoted slum formation in particular areas of the city whilst leaving other locales in more pristine original form, leading to the segregated residential patterns witnessed in Dublin at the time. With a Monte Carlo simulation exercise, we demonstrate that originally wealthy neighborhoods evolved into slums over a relatively short period, partly due to social interactions with households of similar type.
A comment on Sampson's (2023) (with Angenendt D., Bokhari F.A.S., and Zhang J.) Available upon request.
In their paper, Sampson's (2023) introduces a theoretical framework and conducts empirical testing to elucidate the impact of gaps in countries' innovative efficiencies on income, wages, and trade dynamics. We provide an extensive battery of robustness checks, which confirms the resilience of their results. We then scrutinize two key aspects of their study: the choice of developing countries and the innovation measure employed. The outcomes of this refined analysis partly temper the original paper's message of technology gaps driving inequality, underscoring the need for additional data and research in this domain.