Market Concentration and the Productivity Slowdown

Olmstead-Rumsey, Jane (2019): Market Concentration and the Productivity Slowdown.

Abstract

Since around 2000, U.S. aggregate productivity growth has slowed and product market (sales) concentration has risen. At the same time, productivity differences among firms in the same sector appear to have risen dramatically. In this paper I propose a rich model of competition and innovation to explain the coincidence of these three observations. In the model a key parameter governing all three phenomena is the probability that innovating firms make radical innovations. Thus one explanation for rising concentration, slower productivity growth, and wider technology differences among firms is that the incidence of radical innovations has slowed relative to the 1990s, when the internet and other information technology radically transformed production and sales technology in many sectors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Endogenous growth; market concentration; market power; productivity slowdown; superstar firms
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E23 - Production; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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