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The Evolution of U.S. Retail Concentration

Author

Listed:
  • Dominic Smith
  • Sergio Ocampo

Abstract

Increases in concentration have been a salient feature of industry dynamics during the past 30 years. This trend is particularly notable in the U.S. retail sector, where large national firms have displaced small local firms. Existing work focuses on national trends, yet less is known about the dynamics of concentration in local markets and the relationship between local and national trends. We address these issues by providing a novel decomposition of the national Herfindahl-Hirschman Index into a local and a cross-market component. We measure concentration using new data on product-level revenue for all U.S. retail stores and find that despite local concentration increasing by 34 percent between 1992 and 2012, the cross-market component explains 99 percent of the rise in national concentration, reflecting the expansion of multi-market firms. We estimate an oligopoly model of retail competition and find that the increase in markups implied by rising local concentration had a modest effect on retail prices.

Suggested Citation

  • Dominic Smith & Sergio Ocampo, 2020. "The Evolution of U.S. Retail Concentration," Economic Working Papers 526, Bureau of Labor Statistics.
    • Handle: RePEc:bls:wpaper:526
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    File URL: https://www.bls.gov/osmr/research-papers/2020/pdf/ec200080.pdf
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    Cited by:

    1. Giroldo, Renato & Hollenbeck, Brett, 2021. "Concentration, Retail Markups, and Countervailing Power: Evidence from Retail Lotteries," MPRA Paper 109039, University Library of Munich, Germany.
    2. David Autor & Christina Patterson & John Van Reenen, 2023. "Local and national concentration trends in jobs and sales: The role of structural transformation," POID Working Papers 069_updated, Centre for Economic Performance, LSE.
    3. Thomas Hasenzagl & Luis Perez, 2023. "The Micro-Aggregated Profit Share," Papers 2309.12945, arXiv.org, revised Nov 2023.
    4. Oz Shy, 2021. "College Education, Earning Inequality, and Market Power," Journal of Labor Research, Springer, vol. 42(3), pages 334-357, December.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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