Growing Oligopolies, Prices, Output, and Productivity
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Sharat Ganapati
- American Economic Journal: Microeconomics (Forthcoming)
Abstract
American industries have grown more concentrated over the last forty years. In the absence
of productivity innovation, this should lead to price hikes and output reductions, decreasing
consumer welfare. With US Census data from 1972-2012, I use price data to disentangle revenue
from output. Industry-level estimates show that concentration increases are positively correlated
to productivity and real output growth, uncorrelated with price changes and overall payroll, and
negatively correlated with labor’s revenue share. I rationalize these results in a simple model
of competition. Productive industries (with growing oligopolists) expand real output and hold
down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering
labor’s share of output.
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