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9 - Productivity and Competitive Pressure

Published online by Cambridge University Press:  14 April 2022

Carlo Altomonte
Affiliation:
Università Commerciale Luigi Bocconi, Milan
Filippo di Mauro
Affiliation:
IWH-Halle and CompNet
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Summary

For those countries or industries in which a rise in (measured) market power actually translates into an effective restriction of competition and increasing profits, as it seems to be the case for the US, a significant slowdown of investment, business dynamism, fall in labour share and wages has been observed. The latter in turn has several policy implications, from obvious considerations of reduced consumers' welfare, to low productivity growth, to severe implications for the transmission mechanism of monetary policy. However, one has to question the nature of such an increase in market power. If the latter stems from “good” market forces in which industries experience a reallocation of economic activities towards the largest and most productive firms, as some research shows, a debate opens up on the necessary reform of competition policies.

Type
Chapter
Information
The Economics of Firm Productivity
Concepts, Tools and Evidence
, pp. 169 - 198
Publisher: Cambridge University Press
Print publication year: 2022

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