Papers Containing Tag(s): 'Herfindahl Hirschman Index'
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Authors
Hyunseob Kim - 3
Kevin Rinz - 3
Viewing papers 11 through 20 of 46
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Working PaperOn The Role of Trademarks: From Micro Evidence to Macro Outcomes
March 2023
Working Paper Number:
CES-23-16R
What are the effects of trademarks on the U.S. economy? Evidence from comprehensive micro data on trademark registrations and outcomes for U.S. employer firms suggests that trademarks protect firm value and are linked to higher firm growth and marketing activity. Motivated by this evidence, trademarks are introduced in a general equilibrium framework to quantify their aggregate effects. Firms invest in product quality and engage in both informative and persuasive advertising to build a customer base subject to depreciation. Persuasive advertising induces a perception of higher quality. Firms can register trademarks to reduce customer depreciation and enhance product awareness. The model's predictions about trademark registrations, firm growth, and advertising expenditures align with the empirical evidence. The analysis shows that, compared to the counterfactual economy without trademarks, the U.S. economy with trademarks generates higher average product quality but lower variety, ultimately resulting in greater welfare and higher industry concentration. While informative advertising improves welfare, persuasive advertising reduces it. Nevertheless, the positive welfare impact of trademarks outweighs the negative effects of persuasive advertising.View Full Paper PDF
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Working PaperWhat Drives Stagnation: Monopsony or Monopoly?
October 2022
Working Paper Number:
CES-22-45
Wages for the vast majority of workers have stagnated since the 1980s while productivity has grown. We investigate two coexisting explanations based on rising market power: 1. Monopsony, where dominant firms exploit the limited mobility of their own workers to pay lower wages; and 2. Monopoly, where dominant firms charge too high prices for what they sell, which lowers production and the demand for labor, and hence equilibrium wages economy-wide. Using establishment data from the US Census Bureau between 1997 and 2016, we find evidence of both monopoly and monopsony, where the former is rising over this period and the latter is stable. Both contribute to the decoupling of productivity and wage growth, with monopoly being the primary determinant: in 2016 monopoly accounts for 75% of wage stagnation, monopsony for 25%.View Full Paper PDF
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Working PaperU.S. Market Concentration and Import Competition
August 2022
Working Paper Number:
CES-22-34
Many studies have documented that market concentration has risen among U.S. firms in recent decades. In this paper, we show that this rise in concentration was accompanied by tougher product market competition due to the entry of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in concentration was counteracted by the expansion of foreign firms, which reduced domestic firms' share of the U.S. market inclusive of foreign firms' sales. We find that once the sales of foreign exporters are taken into account, U.S. marketconcentration in manufacturing was stable between 1992 and 2012.View Full Paper PDF
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Working PaperShareholder Power and the Decline of Labor
May 2022
Working Paper Number:
CES-22-17
Shareholder power in the US grew over recent decades due to a steep rise in concentrated institutional ownership. Using establishment-level data from the US Census Bureau's Longitudinal Business Database for 1982-2015, this paper examines the impact of increases in concentrated institutional ownership on employment, wages, shareholder returns, and labor productivity. Consistent with theory of the firm based on conflicts of interests between shareholders and stakeholders, we find that establishments of firms that experience an increase in ownership by larger and more concentrated institutional shareholders have lower employment and wages. This result holds in both panel regressions with establishment fixed effects and a difference-in-differences design that exploits large increases in concentrated institutional ownership, and is robust to controls for industry and local shocks. The result is more pronounced in industries where labor is relatively less unionized, in more monopsonistic local labor markets, and for dedicated and activist institutional shareholders. The labor losses are accompanied by higher shareholder returns but no improvements in labor productivity, suggesting that shareholder power mainly reallocates rents away from workers. Our results imply that the rise in concentrated institutional ownership could explain about a quarter of the secular decline in the aggregate labor share.View Full Paper PDF
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Working PaperEmployer Concentration and Labor Force Participation
March 2022
Working Paper Number:
CES-22-08
This paper examines the association between employer concentration and labor outcomes (labor force participation and employment). It uses restricted data from the U.S. Census Bureau's Longitudinal Business Database to estimate, at the county level, to what extent more concentrated labor markets have lower labor force participation rates and lower employment. The analysis also examines whether unionization rates and education levels mediate these associations.View Full Paper PDF
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Working PaperThe Evolution of U.S. Retail Concentration
March 2022
Working Paper Number:
CES-22-07
Increases in national concentration have been a salient feature of industry dynamics in the U.S. and have contributed to concerns about increasing market power. Yet, local trends may be more informative about market power, particularly in the retail sector where consumers have traditionally shopped at nearby stores. We find that local concentration has increased almost in parallel with national concentration using novel Census data on product-level revenue for all U.S. retail stores. The increases in concentration are broad based, affecting most markets, products, and retail industries. We implement a new decomposition of the national Herfindahl Hirschman Index and show that despite similar trends, national and local concentration reflect different changes in the retail sector. The increase in national concentration comes from consumers in different markets increasingly buying from the same firms and does not reflect changes in local market power. We estimate a model of retail competition which links local concentration to markups. The model implies that the increase in local concentration explains one-third of the observed increase in markups.View Full Paper PDF
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Working PaperCapital Investment and Labor Demand
February 2022
Working Paper Number:
CES-22-04
We study how bonus depreciation, a policy designed to lower the cost of capital, impacted investment and labor demand in the US manufacturing sector. Difference-in-differences estimates using restricted-use US Census Data on manufacturing establishments show that this policy increased both investment and employment, but did not lead to wage or productivity gains. Using a structural model, we show that the primary effect of the policy was to increase the use of all inputs by lowering overall costs of production. The policy further stimulated production employment due to the complementarity of production labor and capital. Supporting this conclusion, we nd that investment is greater in plants with lower labor costs. Our results show that recent policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines.View Full Paper PDF
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Working PaperFirm Finances and Responses to Trade Liberalization: Evidence from U.S. Tariffs on China
November 2021
Working Paper Number:
CES-21-37
This paper examines the relationship between a firm's finances and its response to trade liberalization. Using a landmark change in U.S. tariff policy vis-'-vis Chinese imports and micro level data from the U.S. Census Bureau, I find larger manufacturing job losses in better capitalized firms - those with less leverage and more cash on hand. The effects concentrate in industries where weaker balance sheets are likely to lead to collateral and other borrowing constraints, helping rule out alternative explanations. Finally, domestic manufacturing job losses are not accompanied by greater reductions in sales or aggregate employment, but better capitalized firms do exhibit reduced input costs and increased productivity. These findings point to offshoring as the predominant firm response to trade liberalization and suggest a role for financial capacity in facilitating offshoring investments.View Full Paper PDF
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Working PaperThe Industrial Revolution in Services
October 2021
Working Paper Number:
CES-21-34
The U.S. has experienced an industrial revolution in services. Firms in service industries, those where output has to be supplied locally, increasingly operate in more markets. Employment, sales, and spending on fixed costs such as R&D and managerial employment have increased rapidly in these industries. These changes have favored top firms the most and have led to increasing national concentration in service industries. Top firms in service industries have grown entirely by expanding into new local markets that are predominantly small and mid-sized U.S. cities. Market concentration at the local level has decreased in all U.S. cities but by significantly more in cities thatwere initially small. These facts are consistent with the availability of a new menu of fixed-cost-intensive technologies in service sectors that enable adopters to produce at lower marginal costs in any markets. The entry of top service firms into new local markets has led to substantial unmeasured productivity growth, particularly in small markets.View Full Paper PDF
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Working PaperImport Competition and Firms' Internal Networks
September 2021
Working Paper Number:
CES-21-28
Using administrative data on U.S. multisector firms, we document a cross-sectoral propagation of the import competition from China ('China shock') through firms' internal networks: Employment of an establishment in a given industry is negatively affected by China shock that hits establishments in other industries within the same firm. This indirect propagation channel impacts both manufacturing and non-manufacturing establishments, and it operates primarily through the establishment exit. We explore a range of explanations for our findings, highlighting the role of within-firm trade across sectors, scope of production, and establishment size. At the sectoral aggregate level, China shock that propagates through firms' internal networks has a sizable impact on industry-level employment dynamics.View Full Paper PDF
