Grant Category

Market Structure

Are markets becoming less competitive and, if so, why, and what are the larger implications?

The premise of a market economy is that broad-based economic gains come from a well-functioning market. Yet there is evidence that growing economic inequality is undermining our society’s ability to act collectively in pursuit of the nation’s welfare. When stakeholders who comprise economic systems subvert institutions for their own gain, the economy loses. If markets are becoming less competitive, the resulting increase in monopoly power could be contributing to these problems.

New data-driven research provides more evidence that markets are increasingly concentrated and that, in many cases, this is indicative of a reduction in competition. Markups, the traditional measure of monopoly power, are growing. Investment and new business start-ups have been falling steadily even as corporate profits are rising. At the same time, labor income as a share of national income is falling. Does the economy suffer from a monopoly problem and, if so, why, and what are the larger implications?

We are interested in research from an aggregate perspective, which has been common in the macroeconomic and labor literatures, as well as sectoral analysis that has been the focus of industrial organization literatures.

  • The causes of increased concentration
  • Consequences of concentration for productivity, investment, and economic growth
  • Consequences of concentration for labor markets and power

Explore the Grants We've Awarded

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The role of culture and competition in media diversity: Historical evidence from U.S. radio stations

Grant Year: 2020

Grant Amount: $15,000

Grant Type: doctoral

This historical analysis focuses on whether racial discrimination by firms led to underprovision of content for minorities in the U.S. radio market in the post-war Jim Crow era and whether competition in the market reduced the racial divide. More specifically, the researcher looks at how the entry of television in local markets in the 1950s and 1960s affected programming for Black audiences. Using Federal Communications Commission annual financial reports, directories of radio stations, and the National Opinion Research Center’s 1944 and 1946 racial attitude surveys, the author will analyze how and if discrimination played a role in firms’ programming decisions.

Mark-ups in the cement industry: An evolution of scale economies and market power

Grant Year: 2020

Grant Amount: $51,750

Grant Type: academic

Prior research suggests that concentration and firm mark-ups have increased in the United States over the past several decades, potentially resulting in a higher share of income going to capital instead of labor. These previous multi-industry studies have not addressed why concentration and mark-ups may have increased, and how policies, such as greater antitrust enforcement or merger review, could alter these trends. This project aims to contribute to these unanswered questions by focusing on an industry-specific analysis. Utilizing cement industry data from the United States between 1973 and 2019, the authors will explore how technological change sparked by the introduction of the precalciner kiln altered market structure and the changes in the share of income going to owners’ profits relative to workers’ wages over time.

Do merger reviews promote competition and stall consolidation?

Grant Year: 2020

Grant Amount: $75,000

Grant Type: academic

This project will provide estimates of the impact of prospective merger reviews on antitrust enforcement actions, product prices, input prices, output, investment, and research and development. Using administrative data collected through taxation, employment, and antitrust provision, the project exploits the introduction of a premerger notification policy in Chile to see how it changed the types of mergers being agreed to. The result will help policymakers understand how much notification systems have a deterrent impact. Prospective merger reviews constitute a large share of antitrust enforcement expenditures, and yet little work has systematically studied its effectiveness. By providing a comprehensive study across industries using detailed data on real economic variables, this project could provide invaluable insights into the effects of mergers in both input and output markets, the impact of notification requirements, and the resource allocation within enforcement agencies.

Cannabis-infused dreams: A market at the crossroads of criminal and conventional

Grant Year: 2020

Grant Amount: $15,000

Grant Type: doctoral

Policy changes at the state and local levels have created recreational cannabis markets in many municipalities across the United States. It is well-known that the War on Drugs disproportionately incarcerated members of the Black and Latinx communities. This research project will explore how the legalization of recreational cannabis in Seattle, Boston, and San Francisco integrated criminal justice and racial economic equity initiatives. The researcher will conduct interviews and complete a comparative case study of policy debates and implementation. Using this mixed-methods approach, the researcher intends to illuminate how market power granted by states can shape equity.

A large-scale evaluation of merger simulations

Grant Year: 2020

Grant Amount: $75,000

Grant Type: academic

This project asks whether standard merger simulation techniques in industrial organization effectively predict price changes in observed mergers, and if not, if predictions depart from reality systematically and in a way consistent with efficiencies or coordinated effects. Using scanner data, the authors will run a standard merger simulation on a large set of completed mergers and compare predictions to outcomes, creating a comprehensive retrospective of the effects of mergers on prices, which will inform us of whether typical approved mergers in the United States tend to increase prices. They will also study the sources of the prediction error.

Regulation of merger policy is a primary tool of competition policy in the United States. Merger simulations are used to decide whether mergers are anti-competitive or whether they should be permitted. This ambitious project could provide a wealth of information about consummated mergers and the predictive power of merger simulation techniques, contributing to the infrastructure used to regulate competition.

Experts

Former Steering Committee

Emmanuel Saez

University of California, Berkeley

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Grantee

Randall Walsh

University of Pittsburgh

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Guest Author

Mark Paul

New College of Florida

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Grantee

Andrew Elrod

University of California, Santa Barbara

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Grantee

Kristin Smith

Dartmouth College

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