Jinglun Yao, Stockholm University

"Knowledge is (Market) Power"

Abstract

US corporate concentration has been persistently rising over the past century and productivity growth has been concurrently declining. This paper builds a continuous-time Schumpeterian growth model in which a uniform decline in research efficiency increases the relative growth of leading firms compared to laggards and endogenously thickens the Pareto tail of firms' productivity distribution. With a demand system featuring realistic variable demand elasticities, the model explains a large part of the dynamics of firms' productivity, corporate concentration, markup, labor share, R&D cost, entry and exit rates, as well as job creation and destruction rates in the US since the 1980s. The model can also accommodate increasing concentration with a stable markup and labor share in the pre-1980 period by accounting for the role of economic integration. The social planning problem which maximizes discounted consumer welfare is prima facie equivalent to a problem which maximizes discounted firm outputs.

For more information about Jinglun Yao and his interesting work - link to his website.

Contact person: John Kramer