Working Paper: NBER ID: w25066
Authors: Esteban Rossi-Hansberg; Pierre-Daniel Sarte; Nicholas Trachter
Abstract: The views expressed herein are those of the authors and do not necessarily represent the views of the Federal Reserve Bank of Richmond or the Federal Reserve System. We thank Eric LaRose and Sara Ho for outstanding research assistance.Using U.S. NETS data, we present evidence that the positive trend observed in national product-market concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.
Keywords: Market Concentration; Local Competition; National Concentration
JEL Codes: E23; L11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| opening of plants by top firms (L10) | local market concentration declines (L19) |
| national market concentration increases (L11) | local market concentration declines (L19) |
| opening of plants by top firms (L10) | local market concentration remains lower for at least seven years (L19) |
| increasing national concentration (F52) | decreasing local competition (L49) |