The Evolution of Concentration and Markups in the United States Cement Industry

56 Pages Posted: 5 Apr 2022 Last revised: 13 May 2022

See all articles by Nathan Miller

Nathan Miller

Georgetown University - McDonough School of Business

Matthew Osborne

University of Toronto at Mississauga - Department of Management

Gloria Sheu

Board of Governors of the Federal Reserve System

Gretchen Sileo

Georgetown University

Date Written: April 12, 2022

Abstract

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

Suggested Citation

Miller, Nathan and Osborne, Matthew and Sheu, Gloria and Sileo, Gretchen, The Evolution of Concentration and Markups in the United States Cement Industry (April 12, 2022). Georgetown McDonough School of Business Research Paper No. 4041168, Available at SSRN: https://ssrn.com/abstract=4041168 or http://dx.doi.org/10.2139/ssrn.4041168

Nathan Miller (Contact Author)

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Matthew Osborne

University of Toronto at Mississauga - Department of Management ( email )


Canada

Gloria Sheu

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Gretchen Sileo

Georgetown University ( email )

Washington, DC
United States

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