Working Paper: NBER ID: w24768
Authors: Jan De Loecker; Jan Eeckhout
Abstract: To date, little is known about the evolution of market power for the economies around the world. We extract data from the financial statements of over 70,000 firms in 134 countries, and we analyze and document the evolution of markups over the last four decades. We show that the average global markup has gone up from close to 1.1 in 1980 to around 1.6 in 2016. Markups have risen most in North America and Europe, and least in emerging economies in Latin America and Asia. We discuss the distributional implications of the rise in global market power for the labor share and for the profit share.
Keywords: Market Power; Globalization; Markups; Labor Share; Profit Share
JEL Codes: E0; K0; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in markups (D43) | increase in market power (D49) |
| increase in market power (D49) | higher profit share (D33) |
| increase in market power (D49) | lower labor share (E25) |
| increase in markups (D43) | lower consumption (E21) |
| increase in markups (D43) | suboptimal number of consumers priced out of the market (D41) |
| increase in market power (D49) | stifle innovation and investment (O39) |