Global Market Power and its Macroeconomic Implications

By Federico J Diez, Daniel Leigh, Suchanan Tambunlertchai

June 15, 2018

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Format: Chicago

Federico J Diez, Daniel Leigh, and Suchanan Tambunlertchai. Global Market Power and its Macroeconomic Implications, (USA: International Monetary Fund, 2018) accessed November 14, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We estimate the evolution of markups of publicly traded firms in 74 economies from 1980-2016. In advanced economies, markups have increased by an average of 39 percent since 1980. The increase is broad-based across industries and countries, and driven by the highest markup firms in each economic sector. For emerging markets and developing economies, there is less evidence of a rise in markups. We find a positive relation between firm markups and other indicators of market power, such as profits or industry concentration. Focusing on advanced economies, we investigate the relation between markups and investment, innovation, and the labor share at the firm level. We find evidence of a non-monotonic relation, with higher markups being correlated initially with increasing and then with decreasing investment and innovation rates. This non-monotonicity is more pronounced for firms that are closer to the technological frontier. More concentrated industries also feature a more negative relation between markups and investment and innovation. The association between markups and the labor share is generally negative.

Subject: Competition, Financial markets, Labor, Labor share, Production, Productivity, Technology, Total factor productivity

Keywords: Competition, Concentration, Europe, Firm level, Global, Innovation, Investment, Investment rate, Labor share, Market concentration, Market power, Markup, Productivity process, Th firm, Total factor productivity, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/137
Stock No:

WPIEA2018137
ISBN:

9781484361672
ISSN:

1018-5941

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