The U.S. economy has grown more concentrated since the early 1990s, with big players taking home a larger share of revenue across industries. That trend has accelerated in recent years. Much of the concern has been around the financial industry, where despite complaints of “too big to fail,” the number of large, international banks has actually fallen since the crisis.
If America’s Economy Is Winner-Take-All, Why Are Some Smaller Businesses Thriving?
A new paper raises questions about competition and industry concentration.
September 01, 2017
Summary.
The U.S. economy has grown more concentrated since the early 1990s. A new paper by economists Jan De Loecker and Jan Eeckhout argues that the problem isn’t confined to finance, or even large international corporations. Instead, using a clever analytical technique, they show that markups have risen across industries, particularly among smaller firms. Markups have soared from 18% in 1980 to 67% today. In fact, the story this data tells is less one of declining competition and domination by a handful of large multinational firms than it is a story of ever-increasing market power by relatively small businesses. The trend toward higher markups is linked to the major changes sweeping the American economy, as the researchers argue. However, it isn’t the cause of them. Instead, it is another consequence of the radical changes brought about by globalization and the creative destruction that continues to reshape American Main Streets.