(Mis)Allocation, Market Power, and Global Oil Extraction

Journal Article (Journal Article)

We propose an approach to measuring the misallocation of production in a market that compares actual industry cost curves to undistorted (counterfactual) supply curves. As compared to traditional, TFPR- based, misallocation measures, this approach leverages cost data, such that results are readily mapped to welfare metrics. As an application, we analyze global crude oil extraction and quantify the extent of misallocation therein, together with the proportion attributable to market power. From 1970 to 2014, we find substantial misallocation, in the order of US$744 billion, 14.1 percent to 21.9 percent of which is attributable to market power.

Full Text

Duke Authors

Cited Authors

  • Asker, J; Collard-Wexler, A; De Loecker, J

Published Date

  • April 1, 2019

Published In

Volume / Issue

  • 109 / 4

Start / End Page

  • 1568 - 1615

Electronic International Standard Serial Number (EISSN)

  • 1944-7981

International Standard Serial Number (ISSN)

  • 0002-8282

Digital Object Identifier (DOI)

  • 10.1257/aer.20171438

Citation Source

  • Scopus