Market Power and Innovation in the Intangible Economy

Maarten De Ridder

American Economic Review, 2024, vol. 114, issue 1, 199-251

Abstract: This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism, and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs, such as software, can explain these trends. Intangibles reduce marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since the mid-1990s.

JEL-codes: D22 D24 E23 L11 O31 O47 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20201079 (application/pdf)
https://doi.org/10.3886/E192843V1 (text/html)
https://www.aeaweb.org/doi/10.1257/aer.20201079.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20201079.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Market power and innovation in the intangible economy (2024)
Working Paper: Market power and innovation in the intangible economy (2022)
Working Paper: Market Power and Innovation in the Intangible Economy (2019)
Working Paper: Market Power and Innovation in the Intangible Economy (2019)
Working Paper: Market power and innovation in the intangible economy (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:114:y:2024:i:1:p:199-251

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/aer.20201079

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().