Economics Research Community Seminar- Dr Joel Kariel
Title: Market Power and Business Dynamism
Date: 19 October 2023
Time: 15:00-16:00
Location: FDC.3.41
If you would like to attend, please register using the following link:
Market Power and Business Dynamism
Speaker: Dr Joel Kariel, Microeconomic Unit at the Competition & Markets Authority based in Darlington
Joel has research interests are in technological change, market power, firm dynamics, and productivity. I am in the early stages of various projects on `green technologies’: looking at their adoption, relationship with climate policy, and impact on firms.
Abstract:
A growing literature documents and seeks to explain rising market power and declining business dynamism in the United States and around the globe. The evidence for the United Kingdom has so far been less complete. Using firm-level data from the UK’s structural business surveys, 1998-2019, we establish seven facts around UK aggregate market power, business dynamism and structural change in the time series, cross section and panel. We show that: (1) average intermediate consumption and labour markups in the UK have been rising, driven by broad-based rises in services; (2) manufacturing has pulled average markups downwards, consistent with the continued fall in its share of output; (3) across industries, the rise in markups is an upper-tail phenomenon; (4) in contrast to the US, the UK labour share has been remarkably constant; (5) the negative correlation between markup and business dynamism in the time series does not hold cross-sectionally; (6) at the firm level, markups are positively related to productivity and to investments in intangible capital; (7) at the firm level, subsequent sales and employment growth is negatively related to markups and positively related to productivity. We compare aggregate markup trends using the UK structural business surveys to existing results using company accounts information and find them to be similar. Results therefore do not appear to be driven by differences in business populations studied. We argue that theories aimed at explaining the joint rise of markups, fall in business dynamism and productivity slowdown need to be able to account for all seven facts we document.