The Welfare Impact of Market Power: The OPEC Cartel
3 Nov 2025
14:15 -15:45
Times are shown in local time
Open to: All
Chen-Tsao Lecture Theatre (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
Join our upcoming Economics and Policy Seminar
Speaker: Professor Jan De Loecker, KU Leuven
About the seminar topic
We provide an empirical framework to measure the welfare impact of market power that materialises through coordination of production, such as the cartel, in the global crude oil market. We leverage unique micro data on cost and production to quantity the dead weight loss and productivity inefficiency due to the OPEC cartel. We introduce a framework that recognises the likely inter-temporal trade-off that producers face when setting production levels. We rely on an estimated demand system for oil and we consider a range of counterfactual oil supply functions to quantity the welfare loss due to market power. The counterfactual supply curves imply counterfactual price paths that suggest a sizeable impact of market power on the global oil market. This together with the information on field-level costs allows for a model-consistent notion of lost gains from trade due to market power. We find that the welfare impact is large, implying a world-wide revenue tax, on every aspect of economic activity, of about 0.15% or put differently, about US$5 trillion in 2014.
Speaker bio
Jan De Loecker is Professor of Economics and Research Professor (BOF) at KU Leuven, a Fellow of the Econometric Society, former Research Associate at the NBER and a Research Fellow at the CEPR.
Specialising in industrial organisation, international economics and development economics, his research focuses on measuring and identifying the drivers of firm performance, including developing empirical frameworks to estimate productivity, marginal costs and markups using micro-level production data. These methods have been applied to examine the impact of technology, market power and international competition on the performance of producers, industries and economies.
His work has been published in leading journals such as the American Economic Review, Econometrica, Journal of Political Economy and Quarterly Journal of Economics. In recognition of his contributions, he received an Odysseus Research Grant from the Flemish Research Council in 2016, a Consolidator ERC Grant for the project MPOWER in 2019 and the Yrjö Jahnsson Award in 2023.
No registration required
No registration required. If you have any questions about this seminar, please email Emily Brown.