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Deconcentration is the policy of breaking up and divesting operations of large firms in order to reduce the degree of concentration in an industry.

This policy has been advocated from time to time in different countries particularly in periods of high levels of merger activity. Lower industry concentration levels and increase in the number of firms are viewed as being conducive to stimulating competition.

There are however inherent risks in adopting this policy as a general approach to resolving competition problems that may be associated with high industry concentration levels. A structural deconcentration policy may result in significant loss in economic efficiency. Large firms may be large because of economies of scale, superior technology and innovation which may not be divisible without high costs. This is more likely to be the case where firms have attained their respective size in response to market conditions and opportunities.

However, in several countries, particularly in Eastern European economies, growth of industrial concentration and large firm size have been encouraged by deliberate government policy. Deconcentration policies in such an environment may be appropriate in order to promote market oriented firm behaviour and efficiency.

Source Publication:
Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.


Statistical Theme: Financial statistics

Created on Thursday, January 3, 2002

Last updated on Monday, March 3, 2003