Results for “concentration”
170 found

Concentration in product markets

Here are some new results:

This paper uses new data to reexamine trends in concentration in U.S. markets from 1994 to 2019. The paper’s main contribution is to construct concentration measures that reflect narrowly defined consumption-based product markets, as would be defined in an antitrust setting, while accounting for cross-brand ownership, and to do so over a broad range of consumer goods and services. Our findings differ substantially from well established results using production data. We find that 42.2% of the industries in our sample are “highly concentrated” as defined by the U.S. Horizontal Merger Guidelines, which is much higher than previous results. Also in contrast with the previous literature, we find that product market concentration has been decreasing since 1994. This finding holds at the national level and also when product markets are defined locally in 29 state groups. We find increasing concentration once markets are aggregated to a broader sector level. We argue that these two diverging trends are best explained by a simple theoretical model based on Melitz and Ottaviano (2008), in which the costs of a firm supplying adjacent geographic or product markets falls over time, and efficient firms enter each others’ home product markets.

That is a new NBER working paper by C. Lanier Benkard, Ali Kurukoglu, and Anthony Lee Zhang.  It is very supportive of recent research by Estaben Rossi-Hansberg (here and here, with co-authors) that market concentration simply has not been going up in recent times.

Is concentration eroding labor’s share of national income?

Here is a new piece from Joe Kennedy, here are his summary points:

Despite the persistent claims that increased market power has hurt workers, the scholarly evidence is weak, while the macroeconomic data is strong and clear in showing that this is not the principal cause.

Labor’s share of income has declined slightly over the past two decades, but not principally because capital’s share of income has increased.

Most of the decline is offset by an increase in rental income—what renters pay and what the imputed rent homeowners pay for their house. This increase is due to restricted housing markets, not growing employer power in product or labor markets.

Antitrust policy is not causing the drop in labor share, so changing it is not the solution. For issues such as employer collusion over wages or excessive use of noncompete agreements, antitrust authorities already have power to act.

Stringent antitrust policy would do little to raise the labor share of income, but it could very well reduce investment and productivity growth. The better way to help workers is with pro-growth, pro-innovation policies that boost productivity.

This probable untruth received a big boost about three years ago, in part through mood affiliation.  Perhaps other data will yet rescue it, but for now I am watching to see how long it will take to die away.  Ten years perhaps?

Superstar firms and market concentration

A new paper by Autor, Dorn, Katz, Patterson and Van Reenen (some real heavyweights) rebuts the notion that market concentration is rising because of inadequate antitrust concentration:

The fall of labor’s share of GDP in the United States and many other countries in recent decades is we ll documented but its causes remain uncertain. Existing empirical assessments typically rely on industry or macro data obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of “superstar firms.” If globalization or technological changes push sales towards the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms, which have high markups and a low labor share of value-added. We empirically assess seven predictions of this hypothesis: (i) industry sales will increasingly concentrate in a small number of firms; (ii) industries where concentration rises most will have the largest declines in the labor share; (iii) the fall in the labor share will be driven largely by reallocation rather than a fall in the unweighted mean labor share across all firms; (iv) the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; (v) the industries that are becoming more concentrated will exhibit faster growth of productivity; (vi) the aggregate markup will rise more than the typical firm’s markup; and (vii) these patterns should be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.

Here is coverage from Peter Orszag.  As I’ve said before, people are opting for Philippon’s Great Reversal story because of ideology and convenience and mood affiliation, but it is not supported by the facts.

Very real progress on the market concentration debate

As you might expect, it is coming from Chang Tsai-Hsieh and Esteban Rossi-Hansberg, here is their abstract:

The rise in national industry concentration in the US between 1977 and 2013 is driven by a new industrial revolution in three broad non-traded sectors: services, retail, and wholesale. Sectors where national concentration is rising have increased their share of employment, and the expansion is entirely driven by the number of local markets served by firms. Firm employment per market has either increased slightly at the MSA level, or decreased substantially at the county or establishment levels. In industries with increasing concentration, the expansion into more markets is more pronounced for the top 10% firms, but is present for the bottom 90% as well. These trends have not been accompanied by economy-wide concentration. Top U.S. firms are increasingly specialized in sectors with rising industry concentration, but their aggregate employment share has remained roughly stable. We argue that these facts are consistent with the availability of a new set of fixed-cost technologies that enable adopters to produce at lower marginal costs in all markets. We present a simple model of firm size and market entry to describe the menu of new technologies and trace its implications.

This is likely to prove one of the most important papers of the year, here is the pdf link.  The authors open with the example of The Cheesecake Factory, and also health care:

The standardization of production over a large number of establishments that has taken place in sit-down restaurant meals due to companies such as the Cheesecake Factory has taken place in many non-traded sectors. Take hospitals as another example. Four decades ago, about 85% of hospitals were single establishment non-profits. Today, more than 60% of hospitals are owned by forprofit chains or are part of a large network of hospitals owned by an academic institution (such as the University of Chicago Hospitals).

And:

…rising concentration in these sectors is entirely driven by an increase the number of local markets served by the top firms.

Here is a key point:

…we find that total employment rises substantially in industries with rising concentration. This is true even when we look at total employment of the smaller firms in these industries. This evidence is consistent with our view that increasing concentration is driven by new ICT-enabled technologies that ultimately raise aggregate industry TFP. It is not consistent with the view that concentration is due to declining competition or entry barriers, as suggested by Gutierrez and Philippon (2017) and Furman and Orszag (2018), as these forces will result in a decline in industry employment.

This is interesting too, and it departs from say what Amazon is doing:

…we show that the top firms in the economy as a whole have become increasingly specialized in narrow set of sectors, and these are precisely the non-traded sectors that have undergone an industrial revolution. At the same time, top firms have exited many sectors. The net effect is that there is essentially no change in concentration by the top firms in the economy as a whole. The “super-star” firms of today’s economy are larger in their chosen sectors and have unleashed productivity growth in these sectors, but they are not any larger as a share of the aggregate economy.

The paper is titled “The Industrial Revolution in Services.

Has Industry Concentration Increased Price and Restricted Output?

That is part of the title of a new paper by Sharat Ganapati, here is the abstract:

American industries have grown more concentrated over the last few decades, driven primarily by the growth of the very largest firms. Classical economics implies that this should lead to hikes in prices, reduction in output, and decreases in consumer welfare. I investigate forty years of data from 1972-2012 using publicly available market shares and price indices for both the manufacturing and non-manufacturing sectors and find mixed evidence. Manufacturing concentration increases are indeed correlated with slightly higher prices, but not lower output. However concentration increases are correlated with increases in productivity, offsetting a large portion of the price increase. In contrast, non-manufacturing concentration increases over the last twenty years are not correlated with observable price changes, but are correlated with increases in output.

In other words, the output restrictions are not there.  The amazing thing is that, over the last few years, I have seen a few dozen journalists and also economists handle this question, without ever asking much less trying to answer this question (Noah Smith being an exception).

Concentration in the dollar store sector

Already, there are 14,000 one-story cinder block Dollar Generals in the U.S.—outnumbering by a few hundred the coffee chain’s domestic footprint. Fold in the second-biggest dollar chain, Dollar Tree, and the number of stores, 27,465, exceeds the 22,375 outlets of CVS, Rite Aid, and Walgreens combined.

Here is the full Bloomberg piece, by Mya Frazier.  One point here is that “retail concentration,” which we do observe in the data, is unlikely to lead to very high prices.  A subtler point is that the dollar store sector itself is somewhat concentrated.  But that is yet another way of seeing why concentration indices can be misleading: “They’ve taken over a big chunk of the nation’s dollar stores!” isn’t exactly a recipe for sustained high prices, if anything the contrary.  Yet another point is that we may be rather deliberately moving to an uglier but cheaper world.

Is information technology behind industry concentration?

That is the topic of a new paper by James E. Bessen, and it appears the answer is yes:

Industry concentration has been rising in the US since 1980. Why? This paper explores the role of proprietary information technology systems (IT), which could increase industry concentration by raising the productivity of top firms relative to others. Using instrumental variable estimates, this paper finds that industry IT system use is strongly associated with the level and growth of industry concentration. The paper also finds that IT system use is associated with greater plant size, greater labor productivity, and greater operating margins for the top four firms in each industry compared to the rest. Successful IT systems appear to play a major role in the recent increases in industry concentration and in profit margins, moreso than a general decline in competition.

I expect further work in this area.

The concentration of cities claims about Mongolia

From Lyman Stone:

…no matter the adjustment, the US is always one of the lowest-concentration countries, along with China, India, Brazil, Germany, and Japan. We have a very diversified metropolitan ecology, as do those countries.

Third, I’ve highlighted Nordic (purple) and Anglo (orange) countries. Notice that all of the Nordics are much more concentrated than the United States, as are all of the Anglo countries! That one was surprising to me, as I expected large countries like Australia and Canada to be much more comparable to the US. As it is, in terms of population concentration, Poland is more American than Canada.

…my most concentrated countries are indeed Mongolia and Peru. Not kidding here. Both results surprised me given that both countries are fairly large and have big rural populations and, in Peru’s case, my impression was that there were a good number of meaningfully sized cities. But it turns out that, in Peru, Lima metro area alone is almost 30% of the population, and then the other cities are pretty small by comparison; and Lima is, of course, also the capital. In Mongolia, Ulaanbaatar metro area is over half of the nation’s population!

So. If you want to know what country is the most city-state-ish, I would have to answer… it’s Mongolia.

Here is the full essay, noting that Singapore is normalized as a polar option at 100% and thus cannot win the competition.  Also scroll down to the interesting graph on “State and Local Taxes Collected as a Share of GDP”: I am surprised to see Sweden come in at number one.  For all the talk of American federalism, we are just at the OECD average and in fact slightly behind Iceland in these rankings.

The growing concentration of education

Dayton sits on one side of a growing divide among American cities, in which a small number of metro areas vacuum up a large number of college graduates and the rest struggle to keep those they have.

The winners are cities like Bridgeport, Conn., San Francisco and Raleigh, N.C., where more than 40 percent of the population has a college degree. Cities like Youngstown, Ohio, Bakersfield, Calif., and Lakeland, Fla., where less than a fifth of the population has a college degree, are being left behind. The divide shows signs of widening as college graduates gravitate to places with a lot of other college graduates and the atmosphere that creates.

“This is one of the most important developments in recent economic history of this country,” said Enrico Moretti, an economist at the University of California, Berkeley, who just published a book on the topic, “The New Geography of Jobs.”

Here is more.

Competition and Concentration in Health Insurance

Many people have bandied about numbers suggesting that the market for health insurance is highly concentrated.  Here is the President:

Consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company….

But these statistics only include people insured by "insurance companies" even though nationally just over half of all employees get their health insurance from a firm that self-insures.  In other words, as John Lott points out, over half of the market for insurance is being left out of these concentration statistics.

Since about half of employees are insured by a self-insurer, concentration statistics–as typically presented –should be cut roughly in half (precise numbers vary by state).  Firms that self-insure typically outsource benefits management and claim
administration to highly competitive third party administrators.  A key fact according to this paper (which is outdated although I wouldn't expect the basic finding to have changed) is that the populations served, the benefits paid and the premiums paid are about the same for firms that self-insure and firms that buy insurance from a health insurance company.  Thus, concentration among that part of the market served by health insurance firms appears to be well disciplined by the larger market for self-insurance.

Media concentration

It is commonly alleged that media concentration is on the rise. Ben Compaine, in the January issue of Reason magazine (not yet on-line), debunks this myth. In the mid 1980s, the top ten media companies accounted for 38 percent of total revenue. In the late 1990s the figure was higher, but only barely, up to 41 percent. More importantly, different companies shape our media experiences. Where was Comcast, now the largest cable company, twenty years ago? Bertelsmann, now a giant, was barely visible in American markets. Amazon.com and other Internet-related enterprises are new on the scene as well. If media companies are monopolies, their market power is extremely fragile.

Nor are smaller media outlets necessarily better than the larger conglomerates. The larger outlets are much more likely to win awards for their quality, nor are they obviously more biased. Clear Channel radio is now a poster boy for media critics, but its 1200 stations comprise only slightly more than ten percent of a total of 10,500 American stations. Note also that there were only 8000 radio stations in 1980. We now have satellite radio and Internet radio as well.

Compaine makes a nice point in closing:

It may indeed be that at any given moment 80 percent of the audience is viewing or reading or listening to something from the 10 largest media players. But that does not mean it is the same 80 percent all the time, or that it is cause for concern.

The bottom line: When it comes to media, we have more choice and more competition than ever before.

Growing Oligopolies, Prices, Output, and Productivity

The real monopoly problems in our economy are not the firms that push up some very particular concentration indices, rather they are the small, local monopolies, hospitals, and the public education system.  Here is a new investigation (AEA gate) from Sharat Ganapati, you will note that the bold emphasis has been added by yours truly:

American industries have grown more concentrated over the last 40 years. In the absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. With US census data from 1972 to 2012, I use price data to disentangle revenue from output. Industry-level estimates show that concentration increases are positively correlated to productivity and real output growth, uncorrelated with price changes and overall payroll, and negatively correlated with labor’s revenue share. I rationalize these results in a simple model of competition. Productive industries (with growing oligopolists) expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor’s share of output.

That is from the new issue of American Economic Journal: Microeconomics.  Rooftops!  Other research has pointed in the same direction.  Pennsylvania, Ave.: please do not split up America’s best and most productive firms.

The Biden Executive Order on promoting competition

Here is the text, I won’t attempt a summary but here are some running comments:

1. The beginning of the piece suggests that concentration is rising in the American economy.  But this probably isn’t true.  See also these comments by me.

2. Industry concentration has not driven wages down by “as much as 17%” — that’s a porky!  OK, they say “advertised wages,” but come on…

3. I am happy to see the document take on occupational licensing.

4. Contra to the recommendation, we should not ban non-compete agreements outright.  Many non-compete agreements are perfectly normal institutions designed to protect corporate assets against IP theft, client lists for instance.  We should restrict non-compete agreements in some more sophisticated manner, still to be determined.

5. Lower prescription drug prices?  Maybe.  Do they estimate the elasticity of supply?  No.  Thus this discussion would fail my Econ 101 class.  We do know, however, that prescription drugs are one of the very cheapest ways our health care system saves lives, so this is not obviously a good idea.

6. Right to repair laws?  Again, maybe.  But show me the trade-off and cite a cost-benefit analysis.  If software gives more consumer surplus to consumers (again, a maybe), should we be wanting to tax it with contractual restrictions?  Should we be wanting to tax Tesla right now?

7. Portability of bank account information is a good idea.

8. “Empower family farmers…” — do you even need to know what comes next?  Aarghh!!!

9. The order “encourages” the DOJ and FTC to take various actions.  I won’t blame Biden for this, but we’ve way overstepped what executive orders should be doing, some time ago.  The net feeling the honest reader of this section receives is that our antitrust policies toward the large tech companies are not based in much of a notion of rule of law.

10. Should HHS “standardize plan options” in the NHIM to make price shopping easier?  Makes me nervous — diverse market offerings can be good.

11. Lots of tired and not typically true claims and insinuations about concentration in airline markets; see my book Big Business or read Gary Leff.  And shouldn’t airlines charge for bags?  Maybe yes, maybe no, but prices per item are not in general a bad thing.

12. We are warned that farmers and ranchers take in an ever-smaller share of the food dollar spent — thank goodness!  And there are a bunch of other selective, scattered observations about food prices (“corn seed prices have gone up as much as 30% annually…”), but nothing close to systematic or showing an actual market failure (corn prices by the way have been plummeting since 2012).

13. Broadband policy should indeed be improved, but this section reads as messy, should do more to emphasize the notion of competition and common carrier platforms, and how about a mention of StarLink?

14. There’s not really any point in marching through a discussion of the “Big Tech” section.

15. Is there a problem with bank concentration in this country?  Not where I live.  Maybe in some rural areas?

16. YIMBY > NIMBY would do more to limit market power than just about anything else, by the way.

17. Is there even a peep about this country’s biggest and worst-performing monopoly in K-12?  Of course not.  It is Amazon you have to worry about!

So overall this is not great economics.  It is good to see the Biden administration pick up on a few pro-competition issues, but much of the document is not clearly pro-competition either.  The reasoning and evidence are pretty much politicized from start to finish.

Use Fractional Dosing to Speed Vaccination and Save Lives

I’ve been shouting about fractional dosing since January, most recently with my post A Half Dose of Moderna is More Effective Than a Full Dose of AstraZeneca and the associated paper with Michael Kremer and co-authors. Yesterday we saw some big movement. Writing in Nature Medicine, WHO epidemiologists Benjamin Cowling and Wey Wen Lim and evolutionary biologist Sarah Cobey title a correspondence:

Fractionation of COVID-19 vaccine doses could extend limited supplies and reduce mortality.

Exactly so. They write:

Dose-finding studies indicate that fractional doses of mRNA vaccines could still elicit a robust immune response to COVID-192,3. In a non-randomized open-label phase 1/2 trial of the BNT162b2 vaccine, doses as low as one third (10 μg) of the full dose produced antibody and cellular immune responses comparable to those achieved with the full dose of 30 μg (ref. 4). Specifically, the geometric mean titer of neutralizing antibodies 21 days after the second vaccine dose was 166 for the group that received 10 μg, almost the same as the geometric mean titer of 161 for the group that received 30 μg, and 63 days after the second dose, these titers were 181 and 133, respectively4. For the mRNA-1273 vaccine, a dose of 25 μg conferred geometric mean PRNT80 titers (the inverse of the concentration of serum needed to reduce the number of plaques by 80% in a plaque reduction neutralization test) of 340 at 14 days after the second dose, compared with a value of 654 for the group that received the standard dose of 100 μg (ref. 5). According to the model proposed by Khoury et al.6, if vaccine efficacy at the full dose is 95%, a reduction in dose that led to as much as a halving in the post-vaccination geometric mean titer could still be in the range of 85–90%. Although other components of the immune response may also contribute to efficacy, these dose-finding data are at least indicative of the potential for further exploration of fractionation as a dose-sparing strategy. Durability of responses after fractional doses should also be explored.

…Concerns about the evolution of vaccine resistance have been posited as a potential drawback of dose-sparing strategies. However, vaccines that provide protection against clinical disease seem to also reduce transmission, which indicates that expanding partial vaccination coverage could reduce the incidence of infection. As described in a recent paper, lower prevalence should slow, not accelerate, the emergence and spread of new SARS-CoV-2 variants8.

…In conclusion, fractionated doses could provide a feasible solution that extends limited supplies of vaccines against COVID-19, which is a major challenge for low- and middle-income countries.

Also a new paper in preprint just showed that 1/4 doses of Moderna create a substantial and lasting immune response on par with that from natural infection.

Here we examined vaccine-specific CD4+ T cell, CD8+ T cell, binding antibody, and neutralizing antibody responses to the 25 ug Moderna mRNA-1273 vaccine over 7 months post-immunization, including multiple age groups, with a particular interest in assessing whether pre-existing crossreactive T cell memory impacts vaccine-generated immunity. Low dose (25 ug) mRNA-1273 elicited durable Spike binding antibodies comparable to that of convalescent COVID-19 cases. Vaccine-generated Spike memory CD4+ T cells 6 months post-boost were comparable in quantity and quality to COVID-19 cases, including the presence of TFH cells and IFNg-expressing cells.

Finally, an article in Reuters notes that Moderna are preparing to launch a 50 ug dose regimen as a booster and for children. Thus, contrary to some critics of our paper, the technology is ready.

Frankly, governments are way behind on this–they should have been pushing the vaccine manufacturers and funding trials on alternative dosing since at least January. Indeed, imagine how many lives we might have saved had we listened to Operation Warp Speed advisor Moncef Slaoui who advocated for half doses in January. On a world scale, we could have vaccinated tens even hundreds of millions more people by now had we ramped up fractional dosing.

At this point, it’s my view that there is enough knowledge to justify rolling out alternative dosing in any hot spot or in any country worried about outbreaks. Roll it out in a randomized fashion (as Kominers and I discussed in the context of the US vaccination rollout) to study it in real time but start the roll out now. Lives can be saved if we speed up vaccination, especially of the best vaccines we have, the mRNAs. Moderna and Pfizer have together pledged to deliver (mostly Pfizer and mostly through the US) some 250m vaccine doses to COVAX in 2021 for delivery to less developed countries. If we go to half-doses that becomes 500m doses–a life saver. And recall these points made earlier:

Judging by neutralizing antibodies, a 50 ug dose of, for example, Moderna looks to be more effective than standard dosing of many other vaccines including AZ and J&J and much better than others such as Sinovac. Thus alternative dosing is a way to *increase* the quality of vaccine for many people.

A 50 ug dose vaccine available today is much higher quality than a 100 ug dose vaccine available one year from now.

If we have the will, we can increase vaccine supply very rapidly.

Long COVID in a prospective cohort of home-isolated patients

Long-term complications after coronavirus disease 2019 (COVID-19) are common in hospitalized patients, but the spectrum of symptoms in milder cases needs further investigation. We conducted a long-term follow-up in a prospective cohort study of 312 patients—247 home-isolated and 65 hospitalized—comprising 82% of total cases in Bergen during the first pandemic wave in Norway. At 6 months, 61% (189/312) of all patients had persistent symptoms, which were independently associated with severity of initial illness, increased convalescent antibody titers and pre-existing chronic lung disease. We found that 52% (32/61) of home-isolated young adults, aged 16–30 years, had symptoms at 6 months, including loss of taste and/or smell (28%, 17/61), fatigue (21%, 13/61), dyspnea (13%, 8/61), impaired concentration (13%, 8/61) and memory problems (11%, 7/61). Our findings that young, home-isolated adults with mild COVID-19 are at risk of long-lasting dyspnea and cognitive symptoms highlight the importance of infection control measures, such as vaccination.

That is from a new Nature paper by Bjørn Blomberg, et.al. Via SK.  On vaccinating the young, here are further relevant observations from Francois Balloux.