Working Paper: CEPR ID: DP13696
Authors: Carolina Villegas-Sanchez; Federico Dez; Jiayue Fan
Abstract: Using a new firm-level dataset on private and listed firms from 20 countries, we document five stylized facts on market power in global markets. First, competition has declined around the world, measured as a moderate increase in average firm markups during 2000-2015. Second, the markup increase is driven by already high-markup firms (top decile of the markup distribution) that charge increasing markups. Third, markups increased mostly among advanced economies but not in emerging markets. Fourth, there is a non-monotonic relation between firm size and markups that is first decreasing and then increasing. Finally, the increase is mostly driven by increases within incumbents and also by market share reallocation towards high-markup entrants.
Keywords: markups; market power; tfp; firm size
JEL Codes: D2; D4; E2; F6; L1; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Competition has declined globally (F61) | Increase in average firm markups (L11) |
| High-markup firms (L84) | Increase in average firm markups (L11) |
| Increase in average firm markups (L11) | More pronounced in advanced economies (F69) |
| Firm size (L25) | Nonmonotonic relationship with markups (D43) |
| Within-firm increases among incumbents (L19) | Increase in average firm markups (L11) |
| Market share reallocation towards high-markup entrants (D43) | Increase in average firm markups (L11) |