Market power and innovation in the intangible economy

Maarten de Ridder

POID Working Papers from Centre for Economic Performance, LSE

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 U.S. micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since themid-1990s.

Keywords: Productivity; Growth; Business Dynamism; Intangible Inputs; Market Power (search for similar items in EconPapers)
Date: 2022-12-20
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-ent, nep-his, nep-reg and nep-sbm
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cep:poidwp:064

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