Template-Type: ReDIF-Paper 1.0
Title: Causes, Consequences, and Policy Responses to Market Concentration
Author-Name: Thomas Philippon
Abstract: Measures of market concentration in many U.S. industries have been
  rising for nearly four decades. Since the early 2000s, these trends have
  coincided with a falling labor share of income, declining private
  investment, and rising corporate profit rates and markups (the
  difference between price and marginal cost). Philippon argues these
  patterns are unique to the United States; in Europe and Asia, profits,
  aggregate measures of concentration, and labor share of income have been
  stable over time. 
  
  Philippon acknowledges that increasing market concentration does not
  necessarily signal trouble for competitive markets. When producers in
  competitive markets drive down profit margins and out-compete
  inefficient rivals, market concentration will rise and will likely
  correspond to lower prices and higher productivity growth. However,
  market concentration can also increase when competition is being
  inhibited by lax antitrust enforcement or incumbent firm’s successful
  attempts to prevent challengers from entering the market. In this
  scenario, weakened competition would lead to growing market
  concentration, which would coincide with lower productivity growth and
  higher prices.
  
  Philippon asserts that growth in aggregate measures of market
  concentration since the early 2000s is largely attributable to the
  weakening of competition. Lower levels of competition, Philippon argues,
  are directly due to lax antitrust enforcement and barriers to market
  entry. The likelihood of a market leader losing its superior position
  has fallen by 15 percentage points since the mid-1990s, lending support
  to Philippon’s argument that the market power of industry leaders has
  strengthened over this period.
Creation-Date: 2019-11-01
Keywords: industrial organization, antitrust, market concentration
File-URL: https://www.economicstrategygroup.org/wp-content/uploads/2026/06/Causes-Consequences-and-Policy-Responses-to-Market-Concentration.pdf
File-Format: Application/PDF
Handle: RePEc:cxx:wpaper:causes-consequences-and-policy-responses-to-market-concentration