A theory of falling growth and rising rents
Aghion, P.
, Bergeaud, A., Boppart, T., Klenow, P. J. & Li, H.
(2023).
A theory of falling growth and rising rents.
Review of Economic Studies,
90(6), 2675 - 2702.
https://doi.org/10.1093/restud/rdad016
, Bergeaud, A., Boppart, T., Klenow, P. J. & Li, H.
(2023).
A theory of falling growth and rising rents.
Review of Economic Studies,
90(6), 2675 - 2702.
https://doi.org/10.1093/restud/rdad016
Growth has fallen in the U.S. amid a rise in firm concentration. Market share has shifted to low labour share firms, while within-firm labour shares have actually risen. We propose a theory linking these trends in which the driving force is falling overhead costs of spanning multiple products or a rising efficiency advantage of large firms. In response, the most efficient firms (with higher markups) spread into new product lines, thereby increasing concentration and generating a temporary burst of growth. Eventually, due to greater competition from efficient firms, within-firm markups and incentives to innovate fall. Thus our simple model can generate qualitative patterns in line with the observed trends.
Explore Further
- O51 - U.S.; Canada
- O31 - Innovation and Invention: Processes and Incentives
- O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
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Aghion, P., Bergeaud, A., Boppart, T., Klenow, P. & Li, H.
(2022).
Replication package for "A Theory of Falling Growth and Rising Rents".
[Dataset]. Zenodo.
https://doi.org/10.5281/zenodo.7265542