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Increasing differences between firms: market power and the macro-economy

Van Reenen, John (2018) Increasing differences between firms: market power and the macro-economy. CEP Discussion Papers (CEPDP1576). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

A rich understanding of macro-economic outcomes requires taking into account the large (and increasing) differences between firms. These differences stem in large part from heterogeneous productivity rooted in managerial and technological capabilities that do not transfer easily between firms. In recent decades the differences between firms in terms of their relative sales, productivity and wages appear to have increased in the US and many other industrialized countries. Higher sales concentration and apparent increases in aggregate markups have led to the concern that product market power has risen substantially which is a potential explanation for the falling labor share of GDP, sluggish productivity growth and other indicators of declining business dynamism. I suggest that this conclusion is premature. Many of the patterns are consistent with a more nuanced view where many industries have become “winner take most/all” due to globalization and new technologies rather than a generalized weakening of competition due to relaxed anti-trust rules or rising regulation.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
JEL classification: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior
M - Business Administration and Business Economics; Marketing; Accounting > M2 - Business Economics
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 11 Jan 2019 12:16
Last Modified: 16 Jul 2019 23:26
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/91698

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