A Theory of Falling Growth and Rising Rents / Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, Huiyu Li.

Format:

Book

Author/Creator:

Aghion, Philippe.

Contributor:

National Bureau of Economic Research.

Bergeaud, Antonin.

Boppart, Timo.

Klenow, Peter J.

Li, Huiyu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26448.

NBER working paper series no. w26448

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

Growth has fallen in the U.S., while firm concentration and profits have risen. Meanwhile, labor's share of national income is down, mostly due to the rising market share of low labor share firms. We propose a theory for these trends in which the driving force is falling firm-level costs of spanning multiple markets, perhaps due to accelerating IT advances. In response, the most efficient firms (with higher markups) spread into new markets, thereby generating a temporary burst of growth. Because their efficiency is difficult to imitate, less efficient firms find markets more difficult to enter profitably and therefore innovate less. Eventually, due to greater competition from efficient firms, within-firm markups actually fall. Despite the increase in the aggregate markup and rents, firm incentives to innovate decline--lowering the long run growth rate.

Notes:

Print version record

November 2019.