assessments through simulations to predict the direct distributional effects of changes in market concentration could serve as a useful starting point for inputs into a proposed reform program.

The simulation tool presented in this paper, the Welfare and Competition tool (WELCOM), has minimum data requirements: a representative household survey with detailed expenditure data, along with explicit parameters that define the market structure of the industry of interest. This simulation approach builds a set of flexible theoretical models (monopoly, oligopoly with a homogeneous good, and partial collusive oligopoly) into a user-friendly interface that can be used to assess the impact of market concentration on household welfare, poverty, and inequality. WELCOM is a Stata-based package conceived as part of a larger effort by the World Bank to improve the understanding of the links among competition, growth, and shared prosperity as well as to promote policies that foster competition, especially in developing countries.<sup>10</sup> This simulation approach contributes to development policy in three ways. First, it provides a simple tool for practitioners and scholars to implement a first-stage analysis of the distributional effects of changes in market concentration. Second, the simulation approach intends to attract the interest of and use by practitioners to motivate discussions on procompetition policy reforms, as well as to improve the understanding of the likely distributional impacts by identifying potential winners and losers of policy changes. Third, the technique contributes to the emerging literature on the effects of competition on household welfare described above, as well as to the literature on simulation methods, which, to the best of our knowledge, does not include other tools to measure the distributional effects of market concentration.

As with any microsimulation tool, WELCOM is not without limitations. First, the tool follows a partial equilibrium approach that relies on the expenditure of households on the products expected to be affected by the policy reform. It thus only captures the first-order effects of competition on welfare. Second, the current version of WELCOM only analyzes the distributional effects of changes in market concentration through the price channel, potentially missing other impacts from alternative channels, such as labor markets or the value of assets, the diversity of alternatives available for purchase, the reallocation of resources, and new consumers who had previously been priced out under imperfect competition. Notably, competition can improve the quality of the products and services provided without noticeable changes in prices. However, because WELCOM relies on household surveys (which typically do not include detailed information on the quality or brand of the goods and services consumed), the tool is not able to capture the potential welfare effects through quality. Third, the tool does not take into consideration firms that may behave outside the conventional norms established in the microeconomic literature, such as public monopolies that provide subsidized services.

This paper also illustrates an application of the tool by simulating the distributional effects of a rise in competition in two markets in Mexico known because of their high levels of concentration: mobile telecommunication and corn products. The application of WELCOM to Mexico relies on nationally representative household income and expenditure data from the 2014 round of the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH, National Household Income and Expenditure Survey). This data set includes expenditure categories that could be matched with the two markets of interest.

> 10 WELCOM was developed by Poverty and Equity Global Practice in the World Bank. More information about this tool, including installation and documentation, can be found at http://dasp.ecn.ulaval.ca/webwel/welcom.html.

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