The Evolution of Concentration and Markups in the United States Cement Industry
56 Pages Posted: 5 Apr 2022 Last revised: 13 May 2022
Date Written: April 12, 2022
We examine local market concentration and markups in the United States cement industry over 1974-2016. We estimate a model in which buyers use a second-score auction to procure cement from spatially differentiated plants. The model matches aggregated outcomes in the data, and the implied transportation costs and shipping distances are consistent with external sources. We infer local market concentration and markups from the model. At the county-level, the average HHI rises from 1,890 to 2,800 during the sample period. Average markups increase modestly, but prices do not rise. We attribute these changes to a technological innovation---the precalciner kiln---that lowered marginal costs, increased plant-level capacities, and also contributed to an industry shakeout in which many plants closed.
Keywords: markups, concentration, market power, antitrust, cement
JEL Classification: L11, L13, L41, L61
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