Veranstaltung
30
Jan 2023

14:15 - 15:45
IWH Research Seminar

Quantifying Market Power and Business Dynamism in the Macroeconomy

We propose a general equilibrium model with oligopolistic output markets where two channels can cause a change in market power: (i) technology, via changes to productivity shocks and the cost of entry, (ii) market structure, via changes to the number of potential competitors.

Wer
Jan Eeckhout  (Universitat Pompeu Fabra, Barcelona)
Wo
IWH, conference room
Jan Eeckhout

Zur Person

Jan Eeckhout is ICREA Research Professor at Universitat Pompeu Fabra, BSE Research Professor, and Professor of Economics at University College London. He has teaching and research interests in Macroeconomics, with a special emphasis on the labor market.

We propose a general equilibrium model with oligopolistic output markets where two channels can cause a change in market power: (i) technology, via changes to productivity shocks and the cost of entry, (ii) market structure, via changes to the number of potential competitors. First, we disentangle these narratives by matching data on markups, labor reallocation and costs, finding that both channels are necessary to account for the data. Second, we show that changes in technology and market structure yield positive welfare effects through reallocation and selection, but off-setting negative effects from dead-weight loss and overhead. Overall, welfare is 9 percent lower in 2016 than in 1980. Third, the changes we identify explain and decompose cross-sectional patterns in declining business dynamism, declining equilibrium wages and labor force participation via reallocation toward larger, more productive firms. Read more ...

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