Research Highlights Featured Chart

July 25, 2024

A timeline of US big business

How long has corporate concentration been growing?

Tyler Smith

Source: pressmaster

In recent years, many have argued that a few superstar firms are grabbing more and more of the economic pie, raising concerns about the concentration of power. However, it is important to understand the recent increase in corporate concentration within the context of historical trends.

In a paper in the American Economic Review, authors Spencer Y. Kwon, Yueran Ma, and Kaspar Zimmermann provide long-run evidence showing that the assets, sales, and net income going to the top businesses have increased steadily since the early 20th century.

Based on IRS data on the size distribution of US corporations, Figure 1 from the authors’ paper shows the aggregate concentration trends among the largest US corporations over the period 1918–2018.

Figure 1 from Kwon et al. (2024)

The left panel shows the shares of the top 1 percent of all US corporations according to each measure, and the right panel shows the shares of the top 0.1 percent. The blue line with triangles represents their share of assets, the red line with diamonds represents their share of sales, the green line with circles represents their share of net income, and the blue crosses represent their share of equity capital.

Both series indicate a steady upward trend in top shares. In particular, the share of assets held by the top 1 percent increased by 27 percentage points between 1931 and 2018, reaching a total share of 97 percent. The share of assets held by the top 0.1 percent rose even more rapidly over the period. Measured by sales, the top 1 percent’s share rose by 20 percentage points between 1959 and 2018 and was closely tracked by the top 0.1 percent.

While the authors’ work shows that recent concentration continues a well-established trend, the industries accounting for this rise shifted in the 1970s from manufacturing and mining to services, retail, and wholesale.

Since at least the beginning of the twentieth century, the central role of big businesses in the US economy has been growing. This suggests that a full account of rising concentration needs to explain the development over the long run.