Dynamics of Markups, Concentration, and Product Span

Elhanan Helpman, Benjamin Niswonger*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We develop a model with a finite number of multiproduct firms together with a continuum of single-product firms and study the dynamics that arise from product innovation. Consistent with the available evidence, the model predicts rising markups and concentration and a declining labor share. Our dynamics predict the possibility of an inverted-U relationship between labor productivity and product span, for which we provide suggestive evidence. In the optimal allocation, product span and labor productivity are strictly positively related. We also characterize optimal policies for these types of sectors.

Original languageEnglish
Pages (from-to)42-81
Number of pages40
JournalAmerican Economic Journal: Macroeconomics
Volume14
Issue number3
DOIs
StatePublished - 2022
Externally publishedYes

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