Oligopolies, Prices, Output, and Productivity
27 Pages Posted: 11 Sep 2017 Last revised: 15 Feb 2018
Date Written: Febraury 11, 2018
American industries have grown more concentrated over the last forty years. In the absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. Using public data from 1972-2012, I use price data to disentangle revenue from output. Difference-in-difference estimates show that industry concentration growth is positively correlated to productivity and real output growth, uncorrelated with price changes and overall payroll, and negatively correlated with labor's revenue share. Productive industries (with growing oligopolists) expand real output and hold prices down, raising consumer welfare, while maintaining or reducing their workforces, lowering labor's share of output.
Previously circulated as "Oligopolies, Prices, and Quantities: Has Industry Concentration Increased Price and Restricted Output?"
Keywords: Market Power, Market Concentration, Productivity, Prices, Output
JEL Classification: L11, L13, D24, E31, L4
Suggested Citation: Suggested Citation