Download file 82 KB Texto completo en español More of: Claudio Sapelli

This paper examines the theoretical and empirical foundations for the belief that high “concentration” necessarily results in market power, and hence high prices compared to those under competition. It also analyses the reasons why economic groups arise and what their effects are. it concludes that the empirical evidence and theoretical interpretation show that concentration is not a good indicator of how competitive a sector is; and the way markets actually function is often at odds with hypotheses predicting that a small number of firms will permanently dominate the market. Moreover, the evidence seems to suggest that markets in developing economies are not generally more concentrated, less competitive or more likely to be controlled by a small number of firms than they are in developed countries. a study ratifies this for the specific case of Chile.
Academic interest in studying and explaining the appearance economic groups has revived recently. For students of institutions, economic groups exemplify arrangements that arise when other institutions, such as capital or labor markets are weak or non-existent. Nonetheless, economic policy debate normally assumes economic groups to be a source of monopoly power. This has a very clear parallel in discussion of market concentration, which is claimed as an indicator of monopoly power, whereas the empirical evidence suggests it reflects the existence of more efficient firms. It is also assumed that groups are formed to exploit market power and that they grow by doing so. Nonetheless, the empirical evidence seems to show that they are efficient institutions and their existence increases social welfare.