Market power and innovation in the intangible economy
De Ridder, M.
(2024).
Market power and innovation in the intangible economy.
American Economic Review,
114(1), 199 - 251.
https://doi.org/10.1257/aer.20201079
(2024).
Market power and innovation in the intangible economy.
American Economic Review,
114(1), 199 - 251.
https://doi.org/10.1257/aer.20201079
This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism, and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs, such as software, can explain these trends. Intangibles reduce marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since the mid-1990s.
Explore Further
- D20 - General
- D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
- E23 - Production
- L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
- O31 - Innovation and Invention: Processes and Incentives
- O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
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De Ridder, M.
(2023).
Data and Code for: Market Power and Innovation in the Intangible Economy.
[Dataset]. OpenICPSR.
https://doi.org/10.3886/e192843