The Covid-19 pandemic and ongoing geopolitical tensions have revealed the fragility of global supply chains. This column studies the link between supply chain disruptions and the increase in firm market power. It shows that following a supply chain shortage, larger firms gained a competitive advantage due to their diversified supplier networks and greater bargaining power. Increasing market shares of larger firms allowed them to increase prices, and this can account for up to 23% of US inflation in 2021. Effective policies should improve the resilience of supply chains as well as promote fair competition in the post-pandemic world.
- Supply chain shortages, large firms’ market power, and inflation
- Francesco A. Franzoni - Swiss Finance InstituteMariassunta Giannetti - Stockholm School of Economics, Department of FinanceRoberto Tubaldi - BI Norwegian Business School
- VoxEU
- Centre for Economic Policy Research (CEPR)
- Department of Finance
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