Starting a few years ago, a hot topic was industry concentration, markups and whether that was the result of lax antitrust enforcement.
I wondered how much of it was the result of increasing returns pushing the superstar effect deeper into the economy
I wondered how much of it was the result of increasing returns pushing the superstar effect deeper into the economy
It turns out, according to this new paper, that it is likely the case.
Superstar firms have emerged, concentration has risen, and labor share of income has fallen.
They describe a "winner take most" mechanism usually closely associated with tech, but find it across sectors.
Superstar firms have emerged, concentration has risen, and labor share of income has fallen.
They describe a "winner take most" mechanism usually closely associated with tech, but find it across sectors.
Here they lay out the core of their findings.
It's important to note the findings seem consistent across the OECD.
It's important to note the findings seem consistent across the OECD.
They posit both network effects and scale are leading to superstar effects.
As to lax antitrust, they point out the effects hold in Europe, and that sectors that are concentrating see outsized gains in productivity and innovation. Would seem to refute it as primary cause.
As to lax antitrust, they point out the effects hold in Europe, and that sectors that are concentrating see outsized gains in productivity and innovation. Would seem to refute it as primary cause.
"technological dynamism, rather than simply anti-competitive forces, is an important driver—though likely not the sole driver—of this trend"
"One source for the change in the environment could be technological: high tech sectors and parts of retail and transportation as well have increasingly a “winner takes most” aspect."
They also say regulatory capture after achieving dominance is a worthwhile inquiry.
They also say regulatory capture after achieving dominance is a worthwhile inquiry.
It's pretty clear how powerful increasing returns is within technology, where platforms and aggregators are traditionally thought to reside
But it seems likely the impact has and will continue to spread elsewhere
This was a good guess!
They also note that concentration of sales within the top 50 firms of the top 500 has meaningfully increased. So there's increased concentration even among the biggest.
And that the persistence of being among the top 500 firms has been meaningfully increasing
Anyway, tl,dr here's the summary because 100 page academic papers on industry concentration and markups are zzz bloomberg.com/opinion/articl…
I will post the actual paper as well and see which gets more clicks scholar.harvard.edu/files/lkatz/fi…
