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Growing Oligopolies, Prices, Output, and Productivity

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  • Sharat Ganapati

Abstract

American industries have grown more concentrated over the last 40 years. In the absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. With US census data from 1972 to 2012, I use price data to disentangle revenue from output. Industry-level estimates show that concentration increases are positively correlated to productivity and real output growth, uncorrelated with price changes and overall payroll, and negatively correlated with labor's revenue share. I rationalize these results in a simple model of competition. Productive industries (with growing oligopolists) expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor's share of output.

Suggested Citation

  • Sharat Ganapati, 2021. "Growing Oligopolies, Prices, Output, and Productivity," American Economic Journal: Microeconomics, American Economic Association, vol. 13(3), pages 309-327, August.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:3:p:309-27
    DOI: 10.1257/mic.20190029
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    Cited by:

    1. Peter J. Stauvermann & Ronald R. Kumar, 2022. "Does more market competition lead to higher income and utility in the long run?," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 761-782, July.
    2. Lars Vilhuber, 2024. "Report of the AEA Data Editor," AEA Papers and Proceedings, American Economic Association, vol. 114, pages 878-890, May.
    3. Joe Piacentini & Harley Frazis & Peter B. Meyer & Michael Schultz & Leo Sveikauskas, 2022. "The Impact of COVID-19 on Labor Markets and Inequality," Economic Working Papers 551, Bureau of Labor Statistics.
    4. Steven Berry & Martin Gaynor & Fiona Scott Morton, 2019. "Do Increasing Markups Matter? Lessons from Empirical Industrial Organization," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 44-68, Summer.
    5. Kanjilal, Kiriti & Espinola-Arredondo, Ana & Munoz-Garcia, Felix, 2022. "Does the presence of a public firm facilitate merger approvals?," Economics Letters, Elsevier, vol. 219(C).
    6. Chara Vavoura, 2024. "The Rise of the Superstars: Uncovering the Composition Effect of International Trade That Cements the Dominant Position of Big Businesses," Mathematics, MDPI, vol. 12(10), pages 1-21, May.
    7. Bajgar, Matej & Berlingieri, Giuseppe & Calligaris, Sara & Criscuolo, Chiara & Timmis, Jonathan, 2019. "Industry concentration in Europe and North America," LSE Research Online Documents on Economics 103427, London School of Economics and Political Science, LSE Library.
    8. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Nicholas Trachter, 2021. "Diverging Trends in National and Local Concentration," NBER Macroeconomics Annual, University of Chicago Press, vol. 35(1), pages 115-150.
    9. Li, Yifan & Miao, Zhuang, 2024. "The rise of superstar firms in the United States: The role of global sourcing," Journal of Comparative Economics, Elsevier, vol. 52(1), pages 113-144.
    10. liu, Zhizhong & Ju, Bin, 2023. "Network infrastructure construction and heterogeneous enterprise innovation quasi-natural experiment based on “Broadband China”," Information Economics and Policy, Elsevier, vol. 65(C).
    11. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    12. Rivera-Padilla, Alberto, 2023. "Market power, output, and productivity," Economics Letters, Elsevier, vol. 232(C).
    13. Kwon, Spencer Y. & Ma, Yueran & Zimmermann, Kaspar, 2022. "100 years of rising corporate concentration," SAFE Working Paper Series 359, Leibniz Institute for Financial Research SAFE.
    14. Sharat Ganapati, 2020. "Comment on The Servicification of the US Economy: The Role of Startups versus Incumbent Firms," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 390-396, National Bureau of Economic Research, Inc.
    15. Bronnenberg, Bart & Dube, Jean-Pierre & Joo, Joonhwi, 2021. "Millennials and the Take-Off of Craft Brands: Preference Formation in the U.S. Beer Industry," CEPR Discussion Papers 15706, C.E.P.R. Discussion Papers.
    16. Ignatenko, Anna, 2024. "Competition and Price Discrimination in International Transportation," Discussion Paper Series in Economics 6/2024, Norwegian School of Economics, Department of Economics.
    17. Siying Ding & Ahmad Lashkaripour & Volodymyr Lugovskyy, 2024. "A Global Perspective on the Incidence of Monopoly Distortions," CESifo Working Paper Series 11211, CESifo.
    18. MacDonald, James M. & Dong, Xiao & Fuglie, Keith O., 2023. "Concentration and Competition in U.S. Agribusiness," Economic Information Bulletin 337566, United States Department of Agriculture, Economic Research Service.
    19. Eslava, Marcela & Meléndez, Marcela & Ulyssea, Gabriel & Urdaneta, Nicolás & Flores, Ignacio, 2024. "Firms and Inequality in Latin America," IDB Publications (Working Papers) 13480, Inter-American Development Bank.
    20. Ming zhu Wang, 2023. "Changes in industry and corporate effects in the United States, 1978–2019," Strategic Management Journal, Wiley Blackwell, vol. 44(2), pages 477-490, February.
    21. Bart Bronnenberg & Jean-Pierre Dubé & Joonhwi Joo, 2022. "Millennials and the Takeoff of Craft Brands: Preference Formation in the U.S. Beer Industry," Marketing Science, INFORMS, vol. 41(4), pages 710-732, July.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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