Labor share, capital share and efficiency
Barkai finds that the decline in both labor and capital shares of GDP is due to an increase in markups. In particular, he finds that company profits rose from 2.2% in 1984 to 15.7% in 2014, with the trend being more pronounced in industries that underwent large increases in concentration.
Declining Labor and Capital Shares
Author: Simcha Barkai
From: University of Chicago
De Loecker and Eeckhout take Barkai’s findings a step further arguing that in addition to the decline of labor and capital shares, the decline of low-skilled wages and other economic trends can be attributed to the increasing markups and market power. Using Compustat data from 1950 to 2014 they find that since 1980 average markups start to rise from 18% above marginal cost to 67%now.
The Rise of Market Power and the Macroeconomic Implications
Authors:Jan De Loecker, Jan Eeckhout
From: KU Leuven and Princeton University – UPF-ICREA-GSE and UCL
Finally, Blonigen and Pierce identify M&A activity as the main reason for the recent increase in markups. They also find no significant evidence that would suggest that M&A contributes to greater efficiency or higher productivity.
Evidence for the Effects of Mergers on Market Power and Efficiency
Authors: Bruce A. Blonigen, Justin R. Pierce
From: Federal Reserve Board
Not everyone is convinced
The Rise of Market Power?
By: Tyler Cowen – George Mason University
Industry concentration might not be the main reason behind the increase in markups.
Rising Markups and Falling Productivity
By: Dietrich Vollrath – University of Houston
