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Greater market concentration seen worsening inequality

greater market concentration seen worsening inequality - Greater market concentration seen worsening inequality

THE concentration of control within a few companies of basic services and utilities may have worsened inequality by pushing up prices, making services less efficient, while fueling wealth accumulation in a limited number of people, an Ateneo de Manila economist said.

At the 3rd School of Social Sciences Research Conference Monday, economist Geoffrey M. Ducanes said the level of income inequality in the Philippines could be in the top 20 globally out of 140 countries, as measured by the adjusted Gini coefficient.

Market concentration, which increases the risk of abuses of market power, could have an adverse impact on inequality, Mr. Ducanes said, citing the preliminary results of an ongoing study: “Market Concentration and Household Inequality: Exploring the Link in the Case of the Philippines.”

“Inequality in the Philippines, though possibly declining in some dimensions, is still high relative to other countries. Market concentration and market power contribute to this high inequality,” he said.

Inequality also persists in terms of access to goods and services, as seen by the gaps in the quality of education and Internet access available to rich and poor.

He said market concentration manifests itself in high prices, inefficient delivery of goods and services, and excessive profits.

The first two channels affect the inequality in delivery of goods and services, as observed in the history of the capital’s access to water in the past when the government through Metropolitan Waterworks and Sewerage System (MWSS) had sole control over distribution. The situation improved between 1997 and 2020, after two private companies took over as the capital’s water providers, according to Mr. Ducanes.

“Compared to the period when MWSS was the  monopoly in Metro Manila water supply, there has been a big improvement in water access and quality in Metro Manila after the water deregulation and Maynilad Water (Services, Inc.) and Manila Water (Co.) took over as concessionaires. It is still very concentrated, but less so,” he said.

He said the gains in the access to water have also been more significant for those in the bottom income groups.

He also cited internet services, which are expensive but slow.

He said excessive profits resulting from dominant market positions benefit only a few firms and could be a source of income inequality, especially if low-income households do not get a share of the profits.

“It is only highly circumstantial, and we plan to dig deeper, but is it an accident that in the Forbes’ list of US dollar billionaires, more than half have serious involvement in industries that have been identified by studies… to be highly concentrated?,” he said.

Mr. Ducanes said policies that support market competition can help reduce inequality. — Beatrice M. Laforga

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