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European firm concentration and aggregate productivity

Tommaso Bighelli, Filippo Di Mauro, Marc Melitz and Matthias Mertens

No 3/2021, IWH-CompNet Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This article derives a European Herfindahl-Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity towards large and concentrated industries. Over the same period, productivity gains from reallocation accounted for 50% of European productivity growth and markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.

Keywords: allocative efficiency; European market structure; firm concentration; market power; productivity (search for similar items in EconPapers)
JEL-codes: D24 E25 F15 L11 L25 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-bec, nep-eec, nep-eff, nep-ind and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhcom:32021

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