A Theory of Falling Growth and Rising Rents

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J Klenow and Huiyu Li

The Review of Economic Studies, 2023, vol. 90, issue 6, 2675-2702

Abstract: Growth has fallen in the U.S. amid a rise in firm concentration. Market share has shifted to low labour share firms, while within-firm labour shares have actually risen. We propose a theory linking these trends in which the driving force is falling overhead costs of spanning multiple products or a rising efficiency advantage of large firms. In response, the most efficient firms (with higher markups) spread into new product lines, thereby increasing concentration and generating a temporary burst of growth. Eventually, due to greater competition from efficient firms, within-firm markups and incentives to innovate fall. Thus our simple model can generate qualitative patterns in line with the observed trends.

Keywords: Productivity growth slowdown; Concentration; Markups; IT revolution; Overhead costs (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: A Theory of Falling Growth and Rising Rents (2023)
Working Paper: A Theory of Falling Growth and Rising Rents (2023)
Working Paper: A Theory of Falling Growth and Rising Rents (2022)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
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