UCL Department of Economics


Macro Seminar - Jane Olmstead-Rumsey (LSE)

02 November 2022, 12:00 pm–1:30 pm

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Jane Olmstead-Rumsey (LSE) will be presenting at this Macro Seminar

Event Information

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Alan Olivi

Market Concentration and the Productivity Slowdown

Abstract: Since around 2000, U.S. aggregate productivity growth has slowed and product market concentration has risen. To explain these facts, I construct a measure of innovativeness based on patents that is comparable across firms and over time and show that small firms make innovations that are more incremental in the 2000s compared to the 1990s. I develop an endogenous growth model where the quality of new ideas is heterogeneous across firms to analyze the implications of this finding. I use a quantitative version of the model to infer changes to the structure of the U.S. economy between the 1990s and the 2000s. This analysis suggests that declining innovativeness of smaller firms can account for the bulk of the rise in market concentration and the productivity slowdown. Strategic changes in firms’ R&D investment policies in response to the decreased likelihood of laggards making drastic improvements significantly amplify the productivity slowdown.

Location: 321 Drayton House