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Declining Dynamism, Increasing Markups and Missing Growth: The Role of the Labor Force

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  • Michael Peters

    (Yale University)

  • Conor Walsh

    (Yale University)

Abstract

A growing body of empirical research highlights substantial changes in the US economy during the last three decades. Business dynamism – namely job reallocation, firm entry and creative destruction – is declining. Market power, as measured by markups and industry concentration, seems to be on the rise. Aggregate productivity growth is sluggish. We show that declines in the rate of growth of the labor force can qualitatively account for all of these features in a standard model of firm-dynamics. Despite its richness we can characterize the link between population growth and dynamism, markups and growth analytically. When we calibrate the model to the universe of U.S. Census data, the labor force channel can explain a large fraction of the aggregate trends.

Suggested Citation

  • Michael Peters & Conor Walsh, 2019. "Declining Dynamism, Increasing Markups and Missing Growth: The Role of the Labor Force," 2019 Meeting Papers 658, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:658
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    References listed on IDEAS

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    Cited by:

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    2. John G. Fernald & Huiyu Li, 2022. "The Impact of COVID on Productivity and Potential Output," Working Paper Series 2022-19, Federal Reserve Bank of San Francisco.
    3. Auclert, Adrien & Malmberg, Hannes & Martenet, Frederic & Rognlie, Matthew, 2021. "Demographics, Wealth, and Global Imbalances in the Twenty-First Century," CEPR Discussion Papers 16470, C.E.P.R. Discussion Papers.
    4. Fatih Karahan & Benjamin Pugsley & Ayşegül Şahin, 2024. "Demographic Origins of the Start-up Deficit," American Economic Review, American Economic Association, vol. 114(7), pages 1986-2023, July.
    5. De Loecker, Jan & Obermeier, Tim & Van Reenen, John, 2022. "Firms and inequality," LSE Research Online Documents on Economics 117827, London School of Economics and Political Science, LSE Library.
    6. Andrea Atencio De Leon & Claudia Macaluso & Chen Yeh, 2023. "Outsourcing Dynamism," Working Papers 23-64, Center for Economic Studies, U.S. Census Bureau.
    7. Tetsugen HARUYAMA, 2021. "A Schumpeterian Exploration of Gini and Top/Bottom Income Shares," Discussion Papers 2125, Graduate School of Economics, Kobe University.
    8. Michael J. Böhm & Christian Siegel, 2021. "Make Yourselves Scarce: The Effect Of Demographic Change On The Relative Wages And Employment Rates Of Experienced Workers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(4), pages 1537-1568, November.
    9. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    10. Charles I. Jones, 2022. "The End of Economic Growth? Unintended Consequences of a Declining Population," American Economic Review, American Economic Association, vol. 112(11), pages 3489-3527, November.
    11. Trouvain, Florian, 2024. "Technology Adoption, Innovation, and Inequality in a Global World," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302377, Verein für Socialpolitik / German Economic Association.
    12. John G. Fernald & Huiyu Li, 2021. "The Impact of COVID on Potential Output," Working Paper Series 2021-09, Federal Reserve Bank of San Francisco.
    13. Janice Eberly & John G. Fernald, 2022. "Jackson Hole 2022 - Reassessing Economic Constraints: Potential Output (The Impact of COVID on Productivity and Potential Output)," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, August.

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