The Rise of Market Power and the Macroeconomic Implications
Jan De Loecker, Jan Eeckhout, Gabriel Unger
Summary
Using firm-level data for the U.S. economy since 1955, the authors estimate price-cost markups and document a sharp rise in aggregate market power beginning around 1980. They argue this increase in markups can account for several secular macroeconomic trends, including the declining labor and capital shares and reduced labor-market dynamism.
Key findings
- Average markups rose from about 21% over marginal cost in 1980 to roughly 61% by 2016.
- The rise is concentrated in the upper tail of the markup distribution, while the median firm's markup changed little.
- Rising market power offers a unified explanation for falling labor and capital shares, lower low-skill wages, and declining business dynamism.
Subjects & keywords
Cite this paper
Jan De Loecker, Jan Eeckhout, & Gabriel Unger (2020). The Rise of Market Power and the Macroeconomic Implications. The Quarterly Journal of Economics. https://doi.org/10.1093/qje/qjz041
@article{loecker2020rise,
author = {Jan De Loecker and Jan Eeckhout and Gabriel Unger},
title = {The Rise of Market Power and the Macroeconomic Implications},
journal = {The Quarterly Journal of Economics},
year = {2020},
doi = {10.1093/qje/qjz041},
url = {https://doi.org/10.1093/qje/qjz041}
}