The Great Reversal Thomas Philippon NYU, NBER, CEPR Banque de - - PowerPoint PPT Presentation

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The Great Reversal Thomas Philippon NYU, NBER, CEPR Banque de France, PSE, December 2019 The Rise in US Concentration Panel A. Cumulative Change in CR8 (%) 8 6 4 2 0 1980 1990 2000 2010 Manufacturing NonManufacturing Source: U.S.

SLIDE 1

The Great Reversal

Thomas Philippon

NYU, NBER, CEPR

Banque de France, PSE, December 2019

SLIDE 2

The Rise in US Concentration

2 4 6 8 1980 1990 2000 2010 Manufacturing Non−Manufacturing

Panel A. Cumulative Change in CR8 (%)

Source: U.S. Economic Census for all Businesses. Dashed lines because of changes in industry classification from SIC to NAICS.

SLIDE 3

Two Big Questions

Good vs. Bad Concentration?
Good concentration: low prices and productivity growth
e.g, retail & wholesale trade
returns to scale; intangible investment
Bad concentration: high prices and low productivity
e.g., telecoms, airlines, healthcare
what are these barriers?
Technology vs. Policy?
Network effects vs regulation & antitrust

SLIDE 4

Walmart

.2 .4 .6 Market Share .04 .05 .06 .07 .08 Profit Margin 1970 1980 1990 2000 2010 2020 year Profit Margin Market Share

SLIDE 5

Missing Investment from Concentrating Industries

−.15 −.1 −.05 .05 1990 2000 2010 2020 year Top 10 dlog(CR8) Bottom 10 dlog(CR8)

. .

Wtd Average Cumulative K gap

SLIDE 6

Concentration: EU vs. US

SLIDE 7

Comparison of Telecom Prices in FR vs US

.7 .8 .9 1 1.1 1.2 Relative price 2004 2006 2008 2010 2012 2014 year

Relative Price of Communication in France

SLIDE 8

Markups EU vs US

SLIDE 9

Lobbying Expenditures

1 1.5 2 2.5 3 3.5 Total Lobbying Expenditures ($ BN USD) 2000 2005 2010 2015 Year US − Total US − Business EU − Total EU − Business

SLIDE 10

The MissingTrillion Dollar

Monthly savings per households: $300
Nationwide annual household direct savings: $600 billion
General equilibrium impact of returning to competitive

markets

GDP: $1 trillion
Labor Income: $1.25 trillion
Profits: -$250 billion

SLIDE 11

Barriers to Entry?

1000 2000 3000 4000 5000

Median # of Restrictions (NAICS−4)

8 10 12 14 16

Firm Entry Rate

1975 1985 1995 2005 2015

Entry rate Restrictions

SLIDE 12

Fading Stars

SLIDE 13

The Failure of Free Entry

−.5 .5 1 1.5 Elasticity of dLogN(t,t+2) w.r.t. Q(t) 1975 1985 1995 2005 CPSTAT (Firm) QCEW (Estab) SUSB (Firm)

All

SLIDE 14

Good Concentration / Bad Concentration

−.4 −.2 .2 .4 .6 1995 2000 2005 2010 2015 year PC1: "Intangibles" PC2: "Barriers to Entry"