CORDIS
EU research results

CORDIS

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Market Power and Secular Macroeconomic Trends

Project information

Grant agreement ID: 882499

Status

Ongoing project

  • Start date

    1 June 2020

  • End date

    31 May 2025

Funded under:

H2020-EU.1.1.

  • Overall budget:

    € 1 564 000

  • EU contribution

    € 1 564 000

Hosted by:

UNIVERSIDAD POMPEU FABRA

Spain

Objective

In the last four decades, there have been a number of significant secular trends in the advanced economies around the world. Wage inequality has risen sharply, and most of the wage gains have been appropriated by the top 1%. In addition, labor market dynamism and new startups have declined, the labor share of total output has fallen, low skilled wages have stagnated, and there has been reallocation of production from small to superstar firms. During the same four decades, there has also been a sharp secular increase in market power. Firms set higher prices, profit rates are higher, and scale economies are up.
In this proposal, I address the question whether these secular trends are related. Specifically, I ask whether the rise of market power has caused these profound macroeconomic changes. The objective is to uncover economic mechanisms that help understand this fundamental transformation and the implications for efficiency and welfare.
I propose to investigate both the causes of the rise in market power and its macroeconomic consequences. I distinguish between causes that stem inherently from the market structure (such as antitrust enforcement and Mergers & Acquisitions) and those that result from technological change (economies of scale, intangible assets, and network externalities). Methodologically, this research proposal aims to contribute to the literature on three fronts: 1. the measurement of markups, 2. to derive theoretical results linking market power and macroeconomic consequences, 3. to estimate and quantitatively evaluate these models. The close link between the macroeconomic consequences and the causes of market power renders this a research proposal at the intersection of macro/labor, industrial organization and law & economics. The objective is to inform the policy debate: how to keep market power under control in order to remediate its macroeconomic consequences that were hitherto considered independent.

Host institution

UNIVERSIDAD POMPEU FABRA

Address

Placa De La Merce, 10-12
08002 Barcelona

Spain

Activity type

Higher or Secondary Education Establishments

EU Contribution

€ 1 439 000

Beneficiaries (2)

UNIVERSIDAD POMPEU FABRA

Spain

EU Contribution

€ 1 439 000

FUNDACIO PRIVADA BARCELONA GRADUATE SCHOOL OF ECONOMICS

Spain

EU Contribution

€ 125 000

Project information

Grant agreement ID: 882499

Status

Ongoing project

  • Start date

    1 June 2020

  • End date

    31 May 2025

Funded under:

H2020-EU.1.1.

  • Overall budget:

    € 1 564 000

  • EU contribution

    € 1 564 000

Hosted by:

UNIVERSIDAD POMPEU FABRA

Spain