Rising Markups, Common Ownership, and Technological Capacities
DICE Discussion Papers 340, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), 2021
83 Pages Posted: 1 Jul 2020 Last revised: 28 Nov 2022
Date Written: November 27, 2022
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
Suggested Citation: Suggested Citation