Discussion Paper Details
Please find the details for DP12221 in an easy to copy and paste format below:
Title: The Rise of Market Power and the Macroeconomic Implications
Author(s): Jan De Loecker and Jan Eeckhout
Publication Date: August 2017
Keyword(s): Markups; Market Power; Secular Trends; Labor Market.
Programme Area(s): Industrial Organization, Labour Economics and Macroeconomics and Growth
Abstract: We document the evolution of markups based on firm-level data for the US economy since 1950. Initially, markups are stable, even slightly decreasing. In 1980, average markups start to rise from 18% above marginal cost to 67% now. There is no strong pattern across industries, though markups tend to be higher, across all sectors of the economy, in smaller firms and most of the increase is due to an increase within industry. We do see a notable change in the distribution of markups with the increase exclusively due to a sharp increase in high markup firms. We then evaluate the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the last 3 decades: 1. decrease in labor share; 2. increase in capital share; 3. decrease in low skill wages; 4. decrease in labor force participation; 5. decrease in labor flows; 6. decrease in migration rates; 7. slowdown in aggregate output.
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De Loecker, J and Eeckhout, J. 2017. 'The Rise of Market Power and the Macroeconomic Implications'. London, Centre for Economic Policy Research. https://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12221