Increasing differences between firms: market power and the macro-economy

John van Reenen

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

Abstract: A rich understanding of macro-economic outcomes requires taking into account the large (and increasing) differences between firms. These differences stem in large part from heterogeneous productivity rooted in managerial and technological capabilities that do not transfer easily between firms. In recent decades the differences between firms in terms of their relative sales, productivity and wages appear to have increased in the US and many other industrialized countries. Higher sales concentration and apparent increases in aggregate markups have led to the concern that product market power has risen substantially which is a potential explanation for the falling labor share of GDP, sluggish productivity growth and other indicators of declining business dynamism. I suggest that this conclusion is premature. Many of the patterns are consistent with a more nuanced view where many industries have become “winner take most/all” due to globalization and new technologies rather than a generalized weakening of competition due to relaxed anti-trust rules or rising regulation.

Keywords: firm differences; concentration; market power; policy (search for similar items in EconPapers)
JEL-codes: L2 M2 O14 O33 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-com and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Working Paper: Increasing differences between firms: market power and the macro-economy (2018)
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