Large Firms, Consumer Heterogeneity and the Rising Share of Profits / Robert C. Feenstra, Luca Macedoni, Mingzhi Xu.

Format:

Book

Author/Creator:

Feenstra, Robert C.

Contributor:

National Bureau of Economic Research.

Macedoni, Luca.

Xu, Mingzhi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29646.

NBER working paper series no. w29646

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We examine the relationship between large firms and the rising profit share in a model that features oligopolistic competition and consumer heterogeneity. Conditional on the sales distribution, the presence of consumer heterogeneity increases the profit share because it increases firm-level markups. Using data on purchases at the household-barcode level from Nielsen, we quantify the role of consumer heterogeneity, finding that the aggregate markup and the profit share are 8 and 3 percentage points larger than those predicted by a model of a representative consumer. Furthermore, we find that the profit share has been increasing over time and that firm targeting of consumer types plays a role in explaining this rise.

Notes:

Print version record

January 2022.