Market Concentration
Paper Session
Saturday, Jan. 8, 2022 12:15 PM - 2:15 PM (EST)
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Chairs:
Sebastian Heise, Federal Reserve Bank of New York - Caroline Freund, University of California-San Diego
Concentration in Product Markets
Abstract
This paper uses new data to reexamine trends in concentration in U.S. marketsfrom 1994 to 2019. The paper’s main contribution is to construct concentration
measures that reflect narrowly defined consumption-based product markets, as would
be defined in an antitrust setting, while accounting for cross-brand ownership, and
to do so over a broad range of consumer goods and services. Our findings differ
substantially from well established results using production data. We find that 45%
of the industries in our sample are “highly concentrated” as defined by the U.S.
Horizontal Merger Guidelines, which is much higher than previous results. Also
in contrast with the previous literature, we find that product market concentration
has been decreasing since 1994. This finding holds at the national level and also
when product markets are defined locally in 29 state groups. We find increasing
concentration once markets are aggregated to a broader sector level. We argue that
these two diverging trends are best explained by a simple theoretical model based
on Melitz and Ottaviano (2008), in which the costs of a firm supplying adjacent
geographic or product markets falls over time, and efficient firms enter each others’
home product markets.
The Evolution of Firm Heterogeneity in Europe: Facts and Explanations
Abstract
Using firm-level data for a large cross section of European countries, we document facts about reallocation, productivity dispersion and factor shares. The data are consistent with documented facts in the US in two respects: (i) declines in industry-level labor shares are driven by a reallocation of value-added towards low labor share firms and not by a fall in the within-firm labor shares; (ii) increased reallocation of value-added goes hand-in-hand with increased dispersion in productivity between the most productive and less productive firms. However, in contrast to the US, these phenomena appear only in a subset of countries/industries; and are nowhere on the scale of the changes seen in US industries. We then explore a range of possible explanations with a focus on the interaction between technology and government policy.Firms and Inequality
Abstract
Dramatic changes have been documented in the US business landscape in the last fewdecades including rising productivity dispersion between firms, higher aggregate markups, the
growing dominance of big companies, a fall in labor share and declining business dynamism.
In this paper we address several questions: (i) why should we care about such trends in firm
inequality? (ii) have similar trends been occurring in the UK? (iii) What are the explanations for
these trends and (iv) what, if any, should be the policy responses? We conclude that most, but
not all, of the same empirical trends seen in the US have occurred in Britain since the mid 1990s
and the likely explanations are related to fundamental forces of technology and globalization
rather than country-specific institutions. Over the long-run, real wage growth in most countries has tended to follow productivity growth. Since the UK had little productivity growth
since Global Financial Crisis, it is unsurprising that median and mean real wages had barely
recovered to pre-crisis levels by the start of the Pandemic. By contrast to the US, labor shares
do not seem to have fallen since 1980 in the UK, so our key problem is less to do with a decoupling of wages from productivity, and more to do with the severe slowdown in productivity
growth since 2007.
JEL Classifications
- L1 - Market Structure, Firm Strategy, and Market Performance
- F1 - Trade