Market power and innovation in the intangible economy

Maarten De Ridder

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: productivity; growth; business dynamism; intangible inputs; market power; Centre for Macroeconomics; “Investissements d’Avenir” program (reference: ANR-10-EQPX-1; CASD (search for similar items in EconPapers)
JEL-codes: D20 D24 E23 L11 O31 O47 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2024-01-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-eff, nep-ind and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published in American Economic Review, 1, January, 2024, 114(1), pp. 199 - 251. ISSN: 0002-8282

Downloads: (external link)
http://eprints.lse.ac.uk/120285/ Open access version. (application/pdf)

Related works:
Journal Article: 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)
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