Supply Chain Shortages, Large Firms' Market Power, and Inflation

Francesco A. Franzoni, Mariassunta Giannetti and Roberto Tubaldi
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Francesco A. Franzoni: Universita della Svizzera italiana; Swiss Finance Institute; CEPR
Roberto Tubaldi: BI Norwegian Business School

No 23-105, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We suggest an equilibrium mechanism for the widely debated argument that “greedflation” has fostered widespread price hikes. We construct firm and industry-level measures of supply chain backlogs and delivery delays and provide evidence that supply chain shortages lead to a decrease in competition at the industry level. We show that “star” firms acquire market shares and increase their markups and profitability relative to the smaller firms in the industry. We also show that the large increase in supply chain backlogs during the COVID-19 pandemic can help explain about 19% of the US inflation in industries with more asymmetric firm size distribution, where supply chain shortages are more likely to benefit large firms at the expense of smaller firms. Economic magnitudes are comparable in the international sample.

Keywords: Supply Chains; Market Power; Inflation; Production Networks (search for similar items in EconPapers)
JEL-codes: D2 E31 G3 L11 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2023-11
New Economics Papers: this item is included in nep-bec, nep-com and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp23105

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