By: Yueran Ma (ProMarket)
In recent years, one of the most widely discussed findings about the US economy is the rise of concentration in many industries since the 1980s. A number of researchers have analyzed comprehensive census data covering this period to document that the output share of top businesses has been increasing. This evidence has also inspired lively debates on whether the increased concentration is a result of IT, regulation, globalization, low interest rates, or demographics.
Is Rising Concentration a Recent Anomaly or a Long-run Feature?
Looking back, this is certainly not the first time that rising concentration in economic activities has been analyzed theoretically or empirically. Indeed, there is a centuries-old conjecture that rising concentration can be a feature, if not a law, of industrial development. For example, Karl Marx suggested in Das Kapital (1867) that the development of industrial technology would increase economies of scale and concentration in production activities. Twenty three years later, Alfred Marshall expressed similar views in his book Principles of Economics (1890). Perhaps even more surprisingly, Vladimir Lenin collected data to calculate concentration in output and employment in the early 1900s, and argued that “the enormous growth of industry and the remarkably rapid concentration of production…are one of the most characteristic features of capitalism.” Early work by George Stigler titled “Economies of Scale” in 1958 also noted that a greater role of larger companies can be a straightforward reflection of economies of scale…