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Market Concentration and the Productivity Slowdown

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  • Olmstead-Rumsey, Jane

Abstract

Since around 2000, U.S. aggregate productivity growth has slowed and product market (sales) concentration has risen. At the same time, productivity differences among firms in the same sector appear to have risen dramatically. In this paper I propose a rich model of competition and innovation to explain the coincidence of these three observations. In the model a key parameter governing all three phenomena is the probability that innovating firms make radical innovations. Thus one explanation for rising concentration, slower productivity growth, and wider technology differences among firms is that the incidence of radical innovations has slowed relative to the 1990s, when the internet and other information technology radically transformed production and sales technology in many sectors.

Suggested Citation

  • Olmstead-Rumsey, Jane, 2019. "Market Concentration and the Productivity Slowdown," MPRA Paper 93260, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93260
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    References listed on IDEAS

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    Cited by:

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    2. Kariem Soliman, 2021. "Are Industrial Robots a new GPT? A Panel Study of Nine European Countries with Capital and Quality-adjusted Industrial Robots as Drivers of Labour Productivity Growth," EIIW Discussion paper disbei307, Universitätsbibliothek Wuppertal, University Library.
    3. Thomas Kroen & Ernest Liu & Atif Mian & Amir Sufi, 2021. "Falling Rates and Rising Superstars," Working Papers 2021-3, Princeton University. Economics Department..

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    More about this item

    Keywords

    Endogenous growth; market concentration; market power; productivity slowdown; superstar firms;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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