METU Department of Economics Seminar Series (May 9th)
MIDDLE EAST TECHNICAL UNIVERSITY
Department of Economics Seminar Series
"(Market) Power is (Political) Power! The Pressure of Declining Competition on Democracy"
(University of Lausanne (HEC Lausanne))
Date: May 9, 2022 (Monday)
Synchronous Online Seminar
Meeting ID: 962 6861 4522
I study how the concentration of market power among a restricted set of corporates leads to a concentration of political power that ultimately undermines democracy. This type of mechanism has been a long discussion in the literature, which has not been confirmed or rejected by any empirical evidence. My paper aims to fill this gap by shedding light on two recent trends observed globally in the past two decades: the increase in aggregate markups and democratic backsliding. Using a dynamic panel of 80 countries observed over the 1990-2019 period, I provide evidence of a negative causal relationship between market power and democracy. The quantitative estimates suggest that at least one-third of democratic backsliding can be attributed to the concentration of market power. The effect is even larger for developed countries; in the United States, the increasing market power has led to one and a half times more democratic decline than having supposedly occurred under the Trump administration.