Corina Boar, New York University. "Markups and Inequality"
Department seminar. Corina Boar is an Assistant Professor in the Department of Economics at New York University. She will present the paper: "Markups and Inequality" (joint with Virgiliu Midrigan).
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.