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

John Asker,Allan Collard-Wexler,J. Loecker

Published 2019 in The American Economic Review

ABSTRACT

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. (JEL D24, F23, L13, L71, Q35)

PUBLICATION RECORD

  • Publication year

    2019

  • Venue

    The American Economic Review

  • Publication date

    2019-04-01

  • Fields of study

    Economics, Environmental Science

  • Identifiers
    DOI 10.1257/AER.20171438
  • External record

    Open on Semantic Scholar

  • Source metadata

    Semantic Scholar

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