We develop a model with a finite number of multiproduct firms together with a continuum of single-product firms and study the dynamics that arise from product innovation. Consistent with the available evidence, the model predicts rising markups and concentration and a declining labor share. Our dynamics predict the possibility of an inverted-U relationship between labor productivity and product span, for which we provide suggestive evidence. In the optimal allocation, product span and labor productivity are strictly positively related. We also characterize optimal policies for these types of sectors.
Helpman, Elhanan, and Benjamin Niswonger.
"Dynamics of Markups, Concentration, and Product Span."
American Economic Journal: Macroeconomics,
Firm Behavior: Theory
Factor Income Distribution
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Human Capital; Skills; Occupational Choice; Labor Productivity
Innovation and Invention: Processes and Incentives