This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

« Back to Results

Causes and Consequences of Rising Concentration in the United States Economy

Paper Session

Friday, Jan. 4, 2019 10:15 AM - 12:15 PM

Atlanta Marriott Marquis, International 2
Hosted By: American Economic Association
  • Chair: Thomas Philippon, New York University

Fading Stars

German Gutierrez
,
New York University
Thomas Philippon
,
New York University

Abstract

We study the evolution of super star firms in the U.S. economy over the past 60 years. Contrary to
common wisdom, super stars firms have not become larger, have not become more productive, but have
become more profitable. The contribution of star firms to aggregate U.S. productivity growth has fallen
over time, from about 55 basis point per year before 2000 down to about 30 afterwards.

Measuring Labor Market Power Two Ways

José Azar
,
IESE Business School
Ioana Elena Marinescu
,
University of Pennsylvania
Marshall I. Steinbaum
,
Roosevelt Institute

Abstract

We estimate a proxy for the elasticity of labor supply and investigate the relationship between this proxy and labor market concentration. We use data from the popular job posting website CareerBuilder.com to estimate firm-level wage-setting power directly based on the elasticity of job applications in response to variation in the posted wage. In order to deal with the endogeneity of wages, we instrument for local variation in posted wages with posted wages from the same firm in other occupations and other commuting zones. We then relate our estimated application elasticities by commuting zone and occupation to labor market concentration measured with the same job-posting data. We find that the application elasticity to the firm is negatively correlated with local labor market concentration, suggesting that concentration and the application elasticity are both measures of labor market power. We also find that commuting zones and occupations with higher concentration or lower application elasticity tend to have significantly lower wages. This correlation is consistent with higher concentration and lower application elasticity both contributing to wage suppression.

Common Ownership and the Secular Stagnation Hypothesis

José Azar
,
University of Navarra
Xavier Vives
,
IESE Business School

Abstract

Recent work has shown that investment by U.S. firms is low relative to measures of profitability and valuation, such as Tobin’s Q. This fact is even more puzzling given that real interest rates have been at historic lows for over a decade. Several observers have suggested that, at least in part, this pattern of “secular stagnation” can be explained by an increase in market power. In this paper, we explore this hypothesis by developing a macroeconomic model in which higher effective market concentration (including through common ownership) leads to lower equilibrium real interest rates. Our model is different from the ones that have been generally used in the literature on market power and macroeconomic outcomes in that it builds on models of oligopolistic competition from the industrial organization literature, as opposed to the monopolistic competition model.Another new feature of our model is that firms are large and have market power in both product and factor markets, including labor and capital markets. This implies that the wedge between the marginal product of labor and the wage is not necessarily the same as the wedge between the marginal product of capital and the real interest rate, since the level of market power can be different in both markets.


Our calibration results suggest that, without accounting for common ownership, an increase in concentration cannot explain (under plausible values for elasticity parameters) the decline in labor and capital shares in recent decades. However, when taking common ownership into account, the model implies a decline in the labor share that is similar to the actual decline, and a decline in the capitalshare that is somewhat larger than the actual decline

The Implications of Rising Markups on Competition Enforcement

Fiona Scott Morton
,
Yale University

Abstract

TBD
Discussant(s)
Steven J. Davis
,
University of Chicago
Katarína Borovičková
,
New York University
Glen Weyl
,
Microsoft & Yale University
JEL Classifications
  • D2 - Production and Organizations
  • D4 - Market Structure, Pricing, and Design