Tag Archives: market power

Our study aims to help draw together two strands of literature. As the World Inequality Report recently showed, most advanced nations have seen an increase in inequality over the past generation. Meanwhile, a growing body of evidence points to an increase in market power, both in terms of rising market concentration and increasing markups. A burgeoning literature suggests that superstar firms are capturing increasingly high market shares, allowing them to use their market position to earn...

In this post, which is based on my FTC testimony, I explain why growing market power provides a better explanation for higher price-cost margins and rising concentration in many industries, declining economic dynamism, and other contemporary US trends, than the most plausible benign alternative: increased scale economies and temporary returns to the first firms to adopt new information technologies (IT) in competitive markets.The benign alternative has an initial plausibility because the...

Report.Economic Policy InstituteIt’s not just monopoly and monopsony: How market power has affected American wages Josh Bivens, Lawrence Mishel, and John SchmittSee alsoFrom Poverty to PowerThe World Bank’s flagship report this year is on the future of work – here’s what the draft says Duncan Green, strategic adviser for Oxfam GB

These new facts are particularly puzzling from the point of view of the standard neoclassical economic model, in which markets are perfectly competitive. In this view, profits should not persist over the long run, let alone enable the owners of corporations to increase their share of income over time. The standard model, however, cannot address many of the fundamental changes that have occurred in the U.S. economy over the past 40 years.In order to explain these new trends, I and my...

… as the authors of the new report from the United Nations Conference on Trade and Development have explained, there is a growing concern that increasing market concentration in leading sectors of the global economy and the growing market and lobbying powers of dominant corporations are creating a new form of global rentier capitalism to the detriment of balanced and inclusive growth for the many. And they’re not just talking about financial rentier incomes, which has been the focus of...

Earlier this year, a Stigler Center paper by Luigi Zingales [Faculty Director of the Stigler Center and one of the editors of this blog] argued that market concentration can lead to a vicious circle, in which companies use market power to gain political power that in turn allows them to gain more market power, and vice versa. Zingales called this the “Medici vicious circle”: “Money is used to gain political power and political power is then used to make more money.”A new UN report shows...

Back in April, I wrote about one of the most troubling mysteries in economics, the falling labor share. Less of the income the economy produces is going to people who work, and more is going to people who own things.... Mystery to morons conventional economists maybe.Here, Noah, read this: Michal Kalecki, "Political Aspects of Full Employment" (Political Quarterly, 1943). It's even posted at Brad DeLong's site.It's a feature of capitalism, or a bug, depending on which side one is on. The...

The two authors [Jan De Loecker of Princeton University and Jan Eeckhout of University College London] find a large increase in the average markup from 1980 to 2014—specifically an increase by a factor of 3.65. In 1980, the average markup was 18 percent and by 2014, the average was 67 percent. But interestingly, the increase is concentrated at the top of the markup distribution: The firm at the 90th percentile in 2014 had a markup of about 160 percent, compared to a markup of 40 percent for...

The two standard explanations for why labor’s share of output has fallen by 10 percent over the past 30 years are globalization (American workers are losing out to their counterparts in places like China and India) and automation (American workers are losing out to robots). Last year, however, a highly-cited Stigler Center paper by Simcha Barkai offered another explanation: an increase in markups. The capital share of GDP, which includes what companies spend on equipment like robots, is...