Working Paper: NBER ID: w31130
Authors: David Autor; Christina Patterson; John Van Reenen
Abstract: National industrial concentration in the U.S. has risen sharply since the early 1980s, but there remains dispute over whether local geographic concentration has followed a similar trend. Using near population data from the Economic Censuses, we confirm and extend existing evidence on national U.S. industrial concentration while providing novel evidence on local concentration. We document that the Herfindhahl index of local employment concentration, measured at the county-by-NAICS six-digit-industry cell level, fell between 1992 and 2017 even as local sales concentration rose. The divergence between national and local employment concentration trends is attributable to the structural transformation of U.S. economic activity: both sales and employment concentration rose within industry-by-county cells; but reallocation of sales and employment from relatively concentrated Manufacturing industries (e.g., steel mills) towards relatively un-concentrated Service industries (e.g. hair salons) reduced local concentration. A stronger between-sector shift in employment relative to sales drove the net fall in local employment concentration. Holding industry employment shares at their 1992 level, average local employment concentration would have risen by about 9% by 2017. Instead, it fell by 5%. Falling local employment concentration may intensify competition for recent market entrants. Simultaneously, rising within industry-by-geography concentration may weaken competition for incumbent workers who have limited sectoral mobility. To facilitate analysis, we have made data on these trends available for download.
Keywords: concentration; employment; sales; structural transformation; market competition
JEL Codes: E23; J42; L10; L11; L22; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structural transformation of U.S. economic activity (L16) | local employment concentration (R32) |
| reallocation of economic activity from concentrated manufacturing industries to less concentrated service industries (O14) | local employment concentration (R32) |
| structural transformation of U.S. economic activity (L16) | local sales concentration (R32) |
| national industrial concentration has increased (L69) | local employment concentration (R32) |
| national industrial concentration has increased (L69) | local sales concentration (R32) |