A Theory of Falling Growth and Rising Rents

Philippe Aghion, Antonin Bergeaud, Timo Boppart and Pete Klenow
Authors registered in the RePEc Author Service: Huiyu Li

No 2019-11, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Growth has fallen in the U.S. amid a rise in firm concentration. Market share has shifted to low labor share firms, while within-firm labor 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.

JEL-codes: O31 O47 O51 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-01-21
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com and nep-ino
Note: The first version of this Working Paper was published March 27, 2019
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Citations: View citations in EconPapers (61)

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Related works:
Journal Article: A Theory of Falling Growth and Rising Rents (2023)
Working Paper: A Theory of Falling Growth and Rising Rents (2023)
Working Paper: A Theory of Falling Growth and Rising Rents (2023)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
Working Paper: A Theory of Falling Growth and Rising Rents (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2019-11

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DOI: 10.24148/wp2019-11

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