What's Been Happening to Aggregate Concentration in the United States? (And Should We Care?)

Abstract

In this paper I assemble and array two rarely used data sets to measure the extent of aggregate concentration -- the share of national economic activity accounted for by the largest X companies -- in the U.S. in the 1980s and 1990s. The data show clearly that, despite the substantial merger wave of the 1980s and the far larger wave of the 1990s, aggregate concentration declined in the 1980s and the early 1990s. Aggregate concentration increased after the mid 1990s, but the levels at the end of the decade were still at or below the levels of the late 1980s or early 1990s. The average size of firm did increase, however, and the relative importance of the larger size classes of firms increased generally. Gini coefficients computed for employment shares and payroll shares of companies showed moderate but steady increases from 1988 through 1998. In the conclusion of the paper I offer some tentative hypotheses for explaining these patterns.

Key words: aggregate concentration; mergers; size distribution of firms

JEL Classification: L11; L19