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Are U.S. Industries Becoming More Concentrated?

68 Pages Posted: 31 May 2015 Last revised: 7 Sep 2017

Gustavo Grullon

Rice University - Jesse H. Jones Graduate School of Business

Yelena Larkin

Schulich School of Business, York University

Roni Michaely

Johnson@Cornell Tech, Cornell University

Date Written: August 31, 2017

Abstract

Over 75% of U.S. industries have registered an increase in concentration levels over the last two decades. Firms in industries with the largest increases in product market concentration have realized higher profit margins, positive abnormal stock returns, and more profitable M&A deals, which suggest that market power is becoming an important source of value. This paper posits two crucial factors behind this trend: one, lax enforcement of antitrust regulations; and two, increasing technological barriers to entry. These findings are robust to the inclusion of private firms, factors that account for foreign competition, as well as the use of alternative measures of concentration. Overall, our findings suggest the nature of U.S. product markets has undergone a structural shift that has weakened competition across a majority of industries.

Keywords: industry concentration; HHI; product markets; profit margins; publicly-traded firms; M&A; antitrust

JEL Classification: G18, G30, G34, G48, L40, L10

Suggested Citation

Grullon, Gustavo and Larkin, Yelena and Michaely, Roni, Are U.S. Industries Becoming More Concentrated? (August 31, 2017). Available at SSRN: https://ssrn.com/abstract=2612047 or http://dx.doi.org/10.2139/ssrn.2612047

Gustavo Grullon (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

P.O. Box 2932
Houston, TX 77252-2932
United States
(713) 348-6138 (Phone)
(713) 348-6331 (Fax)

HOME PAGE: http://www.ruf.rice.edu/~grullon/

Yelena Larkin

Schulich School of Business, York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Roni Michaely

Johnson@Cornell Tech, Cornell University ( email )

111 8th Avenue #302
New York, NY 10011
United States

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