Industry Concentration and Technological Progress in U.S. Industries

Abstract

This paper analyzes the impact of increasing concentration on the pace of technological progress in the U.S. economy. Since the beginning of the 2000s, the U.S. economy has been in a period of slower capital accumulation marked by lower aggregate productivity growth, while concentration ratio in most industries has increased. Studies analyzing the consequences of increasing concentration provide firm-level evidence that new-technology-induced productivity gains are an important driver behind increasing market power. Motivated by the lack of macro-level evidence for such productivity gains, this paper investigates the relation between new technologies and increasing concentration by focusing on industry-level measures of technological progress: labor and capital productivity, intangible asset intensity, and skilled labor ratio. The results show the impact of concentration on labor and capital productivity to be positive from the late 1990s and early 2000s, yet gradually turning negative through 2000s. While there is a significantly negative relationship between changes in skilled labor use and concentration, there does not seem to be any evidence that industries with increasing concentration are those with higher intangible capital ratio.