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Taking over the World? Automation and Market Power

Author

Listed:
  • Haarburger, Richard
  • Stemmler, Henry

Abstract

This paper studies how automation technology affects market power in the global economy. We develop a theoretical model in which firms' markups are endogenous to factor input choices based on technology levels, but are also affected by technology adoption of other domestic and foreign firms. In an empirical analysis, we find that market power, measured as the markup of price over marginal cost, declines on average with higher levels of automation. However, there is substantial heterogeneity, with firms in the highest revenue and markup quintile gaining market power. Moreover, we find that exposure to foreign automation increases competition in the local market.

Suggested Citation

  • Haarburger, Richard & Stemmler, Henry, 2023. "Taking over the World? Automation and Market Power," EconStor Preprints 281378, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:281378
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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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