Download This PaperRising Markups, Common Ownership, and Technological Capacities
DICE Discussion Papers 340, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), 2021
International Journal of Industrial Organization, Forthcoming
83 Pages Posted: 1 Jul 2020 Last revised: 28 Nov 2022
Date Written: November 27, 2022
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 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 3.3% on average 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 9.6% in high-spillover industries on average. Both findings are consistent with recent theoretical findings in López and Vives (2019).
Keywords: Competition, Common Ownership, Market Power, Industry Structure, Antitrust, Innovation
JEL Classification: L13, L41, L60, G23, G32, O31
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