Working Paper: NBER ID: w25983
Authors: Matias Covarrubias; Germán Gutiérrez; Thomas Philippon
Abstract: We study the evolution of profits, investment and market shares in US industries over the past 40 years. During the 1990’s, and at low levels of initial concentration, we find evidence of efficient concentration driven by tougher price competition, intangible investment, and increasing productivity of leaders. After 2000, however, the evidence suggests inefficient concentration, decreasing competition and increasing barriers to entry, as leaders become more entrenched and concentration is associated with lower investment, higher prices and lower productivity growth.
Keywords: concentration; profits; investment; market shares; competition
JEL Codes: D24; D4; K0; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased concentration (D30) | rising productivity (O49) |
| increased concentration (D30) | falling prices (E31) |
| efficient concentration (D61) | tougher price competition (L11) |
| efficient concentration (D61) | intangible investments (E22) |
| increased concentration (D30) | lower investment (G31) |
| increased concentration (D30) | increased prices (P22) |
| increased concentration (D30) | declining productivity growth (O49) |
| rising barriers to entry (D43) | higher profits (D33) |
| rising barriers to entry (D43) | lower market dynamism (D49) |