Rising Markups, Common Ownership, and Technological Capacities

DICE Discussion Papers 340, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), 2021

65 Pages Posted: 1 Jul 2020 Last revised: 26 Apr 2021

See all articles by Alexandra J. Gibbon

Alexandra J. Gibbon

Duesseldorf Institute for Competition Economics (DICE)

Jan Philip Schain

Duesseldorf Institute for Competition Economics (DICE)

Date Written: April 19, 2021

Abstract

This paper analyses the impact of common ownership on markups and innovation and
adds to the discussion of the recently observed patterns of a long term rise in market
power. Using a rich panel of European manufacturing firms from 2005 to 2016, we
structurally infer markups and construct a measure of common ownership. We use a
propensity score reweighting estimator to eliminate biases due to observational characteristics
and find an increase of firm markups ranging up to 3.4% in industries with
high technological spillovers after the first exposure to common ownership. For companies
directly held by common institutional investors, we also measure a positive effect
on citation-weighted patents of up to 9.5% in high-spillover industries. Both findings
are consistent with recent theoretical findings in Lopéz and Vives (2019). We further
exploit industry technology classifications by the European Commission to shed some
light on the heterogeneity of the effect of common ownership across the sample.

Keywords: Competition, Common Ownership, Market Power, Industry Structure, Antitrust, Innovation

JEL Classification: L10, L41, L60, G23, G32, O34

Suggested Citation

Gibbon, Alexandra J. and Schain, Jan Philip, Rising Markups, Common Ownership, and Technological Capacities (April 19, 2021). DICE Discussion Papers 340, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), 2021, Available at SSRN: https://ssrn.com/abstract=3622912 or http://dx.doi.org/10.2139/ssrn.3622912

Alexandra J. Gibbon (Contact Author)

Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Jan Philip Schain

Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

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