The Anatomy of Concentration: New Evidence From a Unified Framework / Kenneth R. Ahern, Lei Kong, Xinyan Yan.

Format:

Book

Author/Creator:

Ahern, Kenneth R.

Contributor:

National Bureau of Economic Research.

Kong, Lei.

Yan, Xinyan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32057.

NBER working paper series no. w32057

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

Concentration is a single summary statistic driven by two opposing forces: the number of firms in a market and the evenness of their market shares. This paper introduces a generalized measure of concentration that allows researchers to vary the relative importance of each force. Using the generalized measure, we show that the widely-cited evidence of increasing industrial employment concentration is driven by the Herfindahl Index's over-weighting of evenness and under-weighting of firm counts. We propose an alternative, equally-weighted measure that has an equivalent economic meaning as the Herfindahl Index, but possesses superior statistical attributes in typical firm size distributions. Using this balanced measure, we find that employment concentration decreased from 1990 to 2020. Finally, decomposing aggregate diversity into meaningful geographic and industry subdivisions reveals that concentration within regional markets has fallen, while concentration between markets has risen.

Notes:

Print version record

January 2024.